Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

MANCHESTER CORPORATION BILL (By Order)

Read a Second time and committed.

Oral Answers to Questions — COMMONWEALTH AFFAIRS

Malta

Mr. Wingfield Digby: asked the Secretary of State for Commonwealth Affairs what speed of run-down of British Service personnel and of Maltese civilians he announced to the Maltese Government.

The Minister of State, Commonwealth Affairs (Mr. George Thomas): I would refer the hon. Member to the statements by my right hon. Friend the Commonwealth Secretary in the House on 24th January, and by my hon. Friend the Minister of State for Commonwealth Affairs and by my right hon. Friend the Secretary of State for Defence on 2nd February.—[Vol. 739, c. 1274–1284; Vol. 740, c. 807–883.]

Mr. Digby: Will the hon. Gentleman confirm or deny the suggestion that the Maltese counter-proposals have now been rejected and that there are to be new conversations with the Maltese Government, as forecast in The Times today?

Mr. Thomas: I shall be dealing with that in reply to a later Question on the Order Paper.

Mr. Wood: Can the Minister now give the date, which his right hon. Friend did not give at the end of the debate, when N.A.T.O. was informed of the plans of the British Government?

Mr. Thomas: No, Sir, I am afraid that I cannot offhand, but I will communicate with the right hon. Gentleman.

Mr. Wingfield Digby: asked the Secretary of State for Commonwealth Affairs what representations he has received from the Government of Malta about the rapid reduction of defence expenditure and of locally entered employees.

Mr. Wall: asked the Secretary of State for Commonwealth Affairs if he will make a further statement on Malta.

Mr. Goodhart: asked the Secretary of State for Commonwealth Affairs whether he will make a further statement about his discussions with the Maltese Government.

Mr. George Thomas: We are at present in communication with the Government of Malta through the British High Commissioner there, with a view to securing agreement to early talks being held between the two Governments. While these exchanges are in progress, I hope that the House will agree not to press me further.

Mr. Digby: Is the hon. Gentleman aware of the very strong feeling that there is in the country about this, and can he say where the talks will be held—in this country or in Malta?

Mr. Thomas: I am quite unable to give any further details until the exchanges are complete.

Mr. Goodhart: Is the Minister aware that the reason why the Maltese Government are trying to pin so many conditions on these negotiations is because they do not trust Her Majesty's Government as a result of their past experience? Is he also aware that, despite the tension between the Maltese and the British Governments, relations between the Maltese and British communities in Malta are excellent because the entire British community there condemns the policy of Her Majesty's Government?

Mr. Thomas: I do not know if the hon. Gentleman thinks that he is helping the country by his observations. I would only say that it is in the interests of us all to try to get these talks going, and then to make them succeed.

Mr. Barnett: Would my right hon. Friend assure us that he will not give way to pressure on this matter? Will he ensure that the run-down of troops continues with all speed, making it clear that this is a question of aid which cannot be allowed to interfere with the vital need to reduce defence costs?

Mr. Thomas: I cannot add anything to what I have already said; exchanges are under way between the two Governments, and I hope that they will be successful.

Mr. Powell: Can the Minister give the House any assurance that the Malta Parliament will not proceed tomorrow with the Visiting Forces Bill? Can he say why, if the Government are prepared to enter into consultations with the Government of Malta now, they did not do so six or eight weeks ago, when all of this could have been avoided?

Mr. Thomas: The right hon. Gentleman seems to be unaware that consultations have been going on for a very long time. They have been going on for at least five months. The Malta Parliament is due to meet tomorrow and we have naturally made clear to the Malta Government the undesirability of any irrevocable action while our diplomatic exchanges are proceeding.

Mr. Rose: asked the Secretary of State for Commonwealth Affairs what discussion he has had with the Maltese Government on the possibility of a British initiative to channel investment in tourism and industry to Malta.

Mr. George Thomas: The needs of tourism and of industry in Malta have been discussed on many occasions in the context of our aid programme to Malta.

Mr. Rose: Would my hon. Friend explore the possibility of setting up a joint development corporation between Britain and Malta, and would he perhaps also explore with his right hon. Friend the President of the Board of Trade the possibility of incentives for industrialists in this country to take industry to Malta in the wake of the withdrawal of our military establishment?

Mr. Thomas: There already exists a Malta Industrial Development Board, under the chairmanship of a British industrialist. That Board exercises a continuing interest in investment in industry

in Malta. I hope that, if talks between the two Governments get under way, tourism may be a subject which we could discuss with advantage.

Mr. St. John-Stevas: Since the moral responsibility for the present crisis in Malta rests upon the British Government, are not the Minister and the Government under a moral duty to find alternative means of putting the situation right?

Mr. Thomas: We are anxious to discuss these questions with the Malta Government, and we shall approach the subject with goodwill.

B.B.C. External Services

Mr. Fisher: asked the Secretary of State for Commonwealth Affairs whether the British Broadcasting Corporation's external services to the Commonwealth are to be reduced; to what extent; and in which countries.

The Minister of State, Commonwealth Affairs (Mrs. Judith Hart): No, Sir. There will in fact be an improvement in services to Commonwealth Territories in Africa, as the new Ascension Island relay comes into full service.

British Council

Mr. Fisher: asked the Secretary of State for Commonwealth Affairs whether the activities of the British Council are to be curtailed; to what extent; and in which Commonwealth countries.

Mrs. Hart: British Council representation is being withdrawn from four territories namely in Jamaica, Trinidad, Barbados and Fiji, and some staffing economies are being made by reorganisation in Australia and Ceylon.

Mr. Fisher: Surely, cultural propaganda—for want of a better phrase—is really a relatively inexpensive way of making friends and influencing people. Therefore, particularly when economies are necessary, this may be a false one, and not the sort of thing we should cut down on. Will the hon. Lady reconsider it?

Mrs. Hart: I agree that it would be nice to think that no economies were


necessary. I can assure the hon. Gentleman that these have been made with the utmost care. The cultural side of the British Council's work in relation to these territories is largely to be continued by the High Commission's staff. It is the teaching of English, which is less necessary in these particular territories, which will be going.

Hong Kong (Police)

Mr. Patrick Jenkin: asked the Secretary of State for Commonwealth Affairs why he will not disclose to the hon. Member for Wanstead and Woodford the report of the Governor of Hong Kong into a series of allegations against members of the Hong Kong Police which had been made to the Secretary of State for the Colonies by Mr. Alan Ellis of 5, Portman Drive, Woodford Green, Essex, a former officer in the Hong Kong Police.

Mrs. Hart: It is not the practice to make public such reports on investigations into unfounded allegations. The hon. Member is aware of the reasons why the allegations are regarded as being without foundation.

Mr. Jenkin: This is exactly the point. If the report discloses that the allegations that have been made by this young officer are without foundation, why on earth cannot the report be made public? How do the Government expect people who have genuinely-felt grievances to accept these assurances in this atmosphere of secrecy?

Mrs. Hart: It is, as I think the hon. Gentleman will know, perfectly normal public policy in practice, not only in Hong Kong but also here, not to publish things of this kind if there has been found to be no truth in the allegations, for the simple reason that if there is truth in them, it is a matter for the courts, and if there is not, a great deal of harm is done to people who without foundation have been accused of these things. The case has been looked into by three Ministers, and the hon. Gentleman has had the relevant parts of the report read to him.

Mr. James Johnson: May I support the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin)? Is the Minis-

ter aware—I think she is—that I was in Kowloon a few weeks ago? I told the Minister about my impression of that collony in our care. I have seen the Governor in Hong Kong and conveyed my impression to him. He has promised to look into the cases that I have put before him. I hope that the hon. Lady will bestir herself in the matter, because my impression is that it would do no harm for a Commission to visit Hong Kong.

Mrs. Hart: My hon. Friend is under a slightly false impression. I am being asked to publish a report on a particular matter, about which we are satisfied, after detailed inquiries, there is no foundation. That is a very different matter from the kind of point my hon. Friend has in mind.

Hong Kong (Light Electrical Assembly Industry)

Mr. Frank Allaun: asked the Secretary of State for Commonwealth Affairs what is the approximate hourly wage rate for workers in the light electrical assembly industry in Hong Kong in comparison with the rate for British workers engaged in similar work; and what are the numbers employed in this industry in Hong Kong.

Mrs. Hart: I am afraid that the information needed to make an exact comparison between Hong Kong and United Kingdom workers engaged in similar work is not available.
There are 30,186 men and women employed in Hong Kong in the manufacture of electrical machinery, apparatus and appliances.
I am writing to my hon. Friend with those further details which are available.

Mr. Allaun: Is my hon. Friend aware that a Salford firm and its 6,000 workers are seriously hit by this sweated labour? Would she give an assurance that she will look closely into what can be done to help to raise the scandalously low wages in Hong Kong by trade union, legislative or other action?

Mrs. Hart: I sympathise very much with my hon. Friend's concern in so far as it relates to labour conditions in Hong Kong. The rest is for my right hon. Friend the President of the Board of


Trade. I shall soon be discussing this aspect of the problem with trade union representatives here.

Mr. Ian Lloyd: Is the hon. Lady aware that the argument implied in this Question is dangerously tendentious, for the United Kingdom is now a low wage cost country to at least seven or eight of our major industrial competitors?

Mrs. Hart: Questions relating to competition between Hong Kong industry and our own are for my right hon. Friend the President of the Board of Trade.

Mr. Orme: Is my hon. Friend aware that many of us on this side of the House will be highly delighted that she is to discuss this matter with trade union representatives in this country? Would she say what consultations she has had with the International Confederation of Trade Unions and the I.L.O. about low wage rates in Hong Kong?

Mrs. Hart: I have not had any consultations with either, but I have been looking very closely at the I.L.O. regulations.

Rhodesia

Mr. Colin Jackson: asked the Secretary of State for Commonwealth Affairs if he will arrange for accommodation to be made available to the main African parties from Rhodesia in the Rhodesia office in London.

Mr. George Thomas: No, Sir.

Mr. Jackson: I thank the Minister for that helpful reply, but would he not agree that a building purporting to represent the territory of Rhodesia in London should have accommodation available for African nationalists who represent far more people than does the Smith régime?

Mr. Thomas: The staff at Rhodesia House since I.D.I. merely give assistance of a consular nature to Rhodesian citizens, and give factual information about the country in reply to inquiries.

Sir F. Bennett: If the Minister should, unhappily, change his mind in regard to the original Answer, may I ask whether he would care, at the same time, to make representations to all the other High Commission offices in London with a

view to the various one-party African States allowing Opposition Members access to their Commissions?

Mr. Paul B. Rose: asked the Secretary of State for Commonwealth Affairs if he will make a statement on the current effect of sanctions against Rhodesia; and what proposals he has to make these politically effective rather than economically punitive.

Sir Knox Cunningham: asked the Secretary of State for Commonwealth Affairs if he will make a statement on the current effect of sanctions on the economy of Rhodesia.

Mr. George Thomas: We estimate that voluntary sanctions had reduced Rhodesia's exports from an annual figure of £143 million in 1965 to about £80 million by the end of 1966.
Mandatory sanctions should reduce Rhodesia's exports by up to a further £30 million.
The whole purpose of our policy is that sanctions should have a political effect, namely, that Rhodesia should be restored to the rule of law.
It would, therefore, be wrong to regard sanctions as having been imposed in any spirit of vindictiveness; rather it is to make the people of Rhodesia realise the importance of returning to constitutional paths.

Mr. Rose: Is my hon. Friend aware that, among others, the Government of Portugal are conniving at the breach of sanctions through Portuguese East Africa? Would he agree that sanctions can be fully effective and productive only if they are fully enforced and backed up by other means? [HON. MEMBERS: "What means?"] Will my hon. Friend say what steps he is taking to ensure that the spirit of the United Nations resolution is carried out by all nations?

Mr. Thomas: Governments are required to inform the Secretary-General of the United Nations by tomorrow of the measures which they have taken, and the Secretary-General will report to the Security Council by 1st March concerning progress in enforcing sanctions.

Sir Knox Cunningham: When does the hon. Gentleman expect sanctions to end—in three, five or ten years—and, when


the end comes, what conditions will Her Majesty's Government expect to find in Rhodesia?

Mr. Thomas: I only wish that I could tell the hon. and learned Gentleman the answer. We hope that sanctions will be ended as soon as possible, with Rhodesia returning to constitutional rule.

Mr. Alexander W. Lyon: Will my hon. Friend consider issuing a White Paper setting out the Government's information about the effectiveness of sanctions? If any evaluation is to be made of their effectiveness as against the effectiveness of other methods—for instance, the use of force—it is essential that the House should have all the facts before it.

Mr. Thomas: We must wait until 1st March, when the Secretary-General will know from the Governments concerned in the United Nations the extent to which sanctions are observed.

Mr. Wood: Does not the recent statement of the Swiss Government underline the difficulty of making effective this policy of mandatory sanctions? Secondly, will the hon. Gentleman confirm or deny that the Government recently told other Commonwealth countries that the cost to the British balance of payments would be something like £80 million a year? If so, could not this information have been given to the House of Commons?

Mr. Thomas: I am in no position this afternoon to confirm or deny what the right hon. Gentleman seems to have heard about conversations with Commonwealth Governments. In reply to the first part of his question, it is, of course, made more difficult to impose mandatory sanctions if everyone does not observe them. This is self-evident. We are hoping for, and I believe that we will receive, overwhelming support from the United Nations countries in the application of mandatory sanctions.

Mr. Sandys: A very serious charge is being made and the Minister must reply. Does he deny that the British Government have given to Commonwealth Governments a much higher estimate of the cost of sanctions to Britain than they have given to Parliament?

Mr. Thomas: My right hon. Friend the Chancellor of the Exchequer, my right

hon. Friend the Commonwealth Secretary——

Mr. Sandys: Answer.

Mr. Thomas: I am answering. The right hon. Gentleman's privilege is to ask the question. It is my privilege to answer as I want to answer. My right hon. Friends have already dealt with this question and I can add nothing further.

Mr. Biggs-Davison: asked the Secretary of State for Commonwealth Affairs whether it is part of the Government's policy of sanctions to reduce food production in Rhodesia.

Mr. George Thomas: The object of sanctions in the agricultural sector is to deny Rhodesia overseas markets and foreign exchange so long as unconstitutional rule persists. Whether this leads to a reduction in food production or the reverse depends on the alternative uses to which resources hitherto devoted to export crops are put.

Mr. Biggs-Davison: Since the Chancellor of the Exchequer and the Attorney-General have contradicted each other in this House about remittances from the Freedom from Hunger Campaign to Rhodesia, will the hon. Gentleman now give an assurance that funds may be remitted to Rhodesia for the improvement of African agriculture?

Mr. Thomas: Perhaps I may apologise to the House. It was I who gave the information to my right hon. and learned Friend the Attorney-General, who was speaking at the Box. I supplied him with the information, which showed that I had been in my office only a month and I ought to have known better. My right hon. Friend the Chancellor of the Exchequer had indeed been considering it. The answer now is that further representations have been received from the Freedom from Hunger Campaign and are being considered.

Sir C. Osborne: Would not the Minister agree that any settlement that is imposed at the point of the sword cannot endure?

Mr. Thomas: The hon. Gentleman's interest in theology is similar to my own. [HON. MEMBERS: "Answer the question."] It is a very general question. [An HON. MEMBER: "Do not wriggle."] Of


course I am wriggling. It is a wriggling sort of question.

Several Hon. Members: rose——

Mr. Speaker: Order. I called Lord Balniel for another wriggling question.

Lord Balniel: The Minister's answer epitomises the Government. I should like to ask him a rather blunt question on the policy of sanctions. Does he recollect that Lord Caradon said at the United Nations that action under Chapter VII of the Charter could be taken only
when an immediate threat of hostilities exists"?
While I deplore many aspects of the setup in Rhodesia, may I ask what is the immediate threat of hostilities which exists?

Mr. Thomas: The House has gone over and over this question. The noble Lord knows that the answer has been given so often that it would be unfair of me to repeat it.

Mr. Speaker: Order. The Question is about the effect of sanctions on food production.

Mr. John Lee: asked the Secretary of State for Commonwealth Affairs if he will make a statement on the circumstances leading to the illegal expulsion from Rhodesia of certain members of the staff of the British Broadcasting Corporation on 31st January.

Mr. George Thomas: I understand that three members of the B.B.C. were informed on their arrival at Salisbury airport on 30th January that they were prohibited immigrants. After being held in a police station overnight, they boarded a plane for South Africa. The illegal régime later announced that the B.B.C. had earlier been required to remove their personnel from Rhodesia and that, if the B.B.C. chose to ignore the wishes of the régime, the régime would
not admit itinerant personnel and thus allow the B.B.C. to further their campaign against Rhodesia".
I am sure all members of the House will regret this further example of the régime's attitude to those concerned with reporting events in Rhodesia.

Mr. Lee: While thanking my hon. Friend for that Answer, may I draw his attention to his earlier Answer with

regard to Rhodesia House? Does not this suggest that it is rather silly to allow the illegal régime's personnel to continue to be represented in Rhodesia House?

Mr. Speaker: Order. We cannot go back on Questions.

Mr. Ronald Bell: Is the Minister aware that the B.B.C. has been grossly biased in its reporting of the dispute between the Prime Minister and the Rhodesian Government? Will he not get over all these problems of illegality which have been raised by according long overdue recognition to the de facto Government of Rhodesia? [HON. MEMBERS: "Shame."]

Mr. Thomas: At least, the hon. and learned Member makes it clear that he is Mr. Smith's man on this question. We consider that the B.B.C. has behaved with impartiality. As the House knows, the B.B.C. is not controlled in any way by Her Majesty's Government and the reputation of the B.B.C. over the world for giving news correctly is such that the hon. and learned Member should be ashamed of the slur which he has cast.

Mr. Biggs-Davison: asked the Secretary of State for Commonwealth Affairs what financial assistance the Government has given the British Broadcasting Corporation for the dissemination in Rhodesia of information about its World Service and African Service transmissions to Rhodesia.

Mrs. Hart: The B.B.C. is responsible for originating all its publicity. At the Corporation's request the British Government paid for the postage of B.B.C. pamphlets containing information about the services mentioned.

Mr. Biggs-Davison: Can the hon. Lady say how much it is costing to send all these leaflets by first-class airmail to members of the Rhodesia public? Will the Government seriously try again to reach a settlement so that the B.B.C. can be released from these hole and corner, cloak and dagger operations and get back the freedom of the Rhodesia air?

Mrs. Hart: Were I to give the hon. Gentleman the answer which he wants, the régime would know how many pamphlets were dispatched. We do not choose that they should know that. May


I add, in suport of my hon. Friend's remarks in reply to a previous Question, that, whereas one can well understand the eagerness with which many hon. Gentlemen opposite accept the censorship imposed by the régime in Rhodesia, it is difficult to understand why they resist the spread of truth.

Mr. Biggs-Davison: On a point of Order, Mr. Speaker. Is it in order for the hon. Lady to suggest that hon. Members like myself support Rhodesia censorship—[Interruption.] When I was in Salisbury, I went to see the Minister responsible for the censorship to give him my views upon the undesirable nature of that censorship.

Mr. Speaker: Order. I have heard nothing out of order.

Zambia (Aid)

Mr. Evelyn King: asked the Secretary of State for Commonwealth Affairs what conditions he proposes to attach to the £14,000,000 loan to Zambia.

Sir G. Nabarro: asked the Secretary of State for Commonwealth Affairs, in view of the switching of Great Britain's European industrial competitiors of valuable orders from Zambia, including a 1,100 mile oil pipeline to the coast, whether he will seek to continue his conversations with the Zambian Government, initiated at the last Commonwealth Conference, requiring Great Britain's contemporary tranche of £14 million Zambian aid to be spent only on British goods and services in order to initiate a policy of British-African tied aid.

Mr. George Thomas: The assistance to Zambia of up to £13·85 million is related to a list of projects agreed between the Zambian Government and ourselves, designed to help Zambia reduce her economic dependence on Rhodesia, and thus take an increasing part in economic sanctions against the illegal régime.
On the question of tying this assistance to British goods and services, have nothing to add to the remarks made by my right hon. Friend the Prime Minister, on 26th January.

Mr. King: Would the Minister contradict the assertion made in the Press, which is harmful, that it was any part of

these negotiations that Zambia should remain in the Commonwealth?

Mr. Thomas: I do not want to be drawn into details about the agreement, but I assure the House that, as far as I know, that was certainly not part of the understanding.

Sir G. Nabarro: The Minister referred to Zambia reducing her "dependence on Rhodesia". Is he not aware that the pipeline referred to in my Question No. 24—a pipeline 1,100 miles long—is for the specific purpose of reducing dependence on Rhodesia? As British funds have been given to Zambia for this specific purpose, why is the Commonwealth Office allowing this important contract to be placed with our Italian competitors? Why should I subsidise Italian industry?

Mr. Thomas: rose—

Sir G. Nabarro: Come on. Do not waste time. Get on with it.

Hon. Members: Order.

Mr. Thomas: I am not offended. I do not expect anything better from the hon. Gentleman.

Sir G. Nabarro: Now answer the question.

Mr. Thomas: Mr. Speaker——

Mr. Speaker: Order. Asperities do not help.

Mr. Thomas: I was not expressing any asperities, Mr. Speaker. I had the rudeness levelled at me, and I will reply. This pipeline was not part of the Agreement to which the hon. Gentleman referred. Furthermore, it is agreed that British firms, on this question, had to compete with international firms.

Sir G. Nabarro: In view of the most unsatisfactory reply, I beg leave to give notice that I will raise the matter on the Adjournment.

Australian and New Zealand Forces (Vietnam)

Mr. Marten: asked the Secretary of State for Commonwealth Affairs what practical aid Great Britain is rendering to the Australian and New Zealand forces in Vietnam.

Mrs. Hart: None, Sir.

Mr. Marten: In view of the fact that the Russians are quite openly giving aid to the North Vietnamese, is it not really rather shaming that the British do not offer to give more aid to our Australian and New Zealand allies fighting in Vietnam?

Mrs. Hart: If the hon. Gentleman wishes to explore questions of policy on Vietnam, he should put down a Question to my right hon. Friends the Foreign Secretary or the Prime Minister.

Mr. John Lee: Is my hon. Friend aware that the only assistance we should like to give the Australians and New Zealanders is to provide the passages to take their troops home, which they should never have left?

Sir A. V. Harvey: Ask Mr. Holt.

Canada (Expo 67)

Mr. Gwynfor Evans: asked the Secretary of State for Commonwealth Affairs (1) whether he will sub-divide the expenditure of £2,500,000 which is to be incurred by Her Majesty's Government on participation in Expo 67 in a manner which will permit the distinct and adequate representation of the national life of each of the nations of the United Kingdom;
(2) if he will make a statement on the policy he follows when presenting the character and achievements of the industry and culture of Wales, Scotland, and England, respectively, in international exhibitions, such as Expo 67, where the countries of Great Britain are represented by a Government-sponsored project.

Mrs. Hart: The United Kingdom participates as an internationally recognised State in general international exhibitions. As my right hon. Friend informed the hon. Gentleman on 26th January, we seek to present an image of the United Kingdom as a whole, all its peoples, their history, achievements and future.—[Vol. 739. c. 356–7.] It would not be practicable to subdivide the expenditure involved in the way the hon. Member suggests.

Mr. Evans: Is the Minister aware that 70 to 80 countries, including, for instance, Monaco and Togoland, are separately

represented in this great international exhibition? Does she realise that the people of Wales are getting sick and tired of seeing their industrial and national life ignored on the pretext that this is a national State, a one-nation State, whereas it is a multi-national State and should be so recognised?

Mrs. Hart: Nobody will be more aware of the multi-national nature of Britain than the Canadians, with all their Celtic ancestry. The hon. Gentleman will be delighted to know that among those whose names are clearly put forward in the pavilion are Richard Thomas and Baldwin, of Newport, Dylan Thomas, Lloyd George, and Robert Owen, although I would claim a little part of Robert Owen for my constituency.

Mr. Elystan Morgan: Does not the Minister agree that if distinctive and separate mention can be made of firms and individuals, it would be only just and practical to make distinctive mention of Wales as a national entity?

Mrs. Hart: One can assume that there is sufficient public knowledge in Canada, particularly of the background of people like Dylan Thomas and Lloyd George, for it to be known that they come from Wales.

Bahamas (United Kingdom Visitors)

Mr. Tilney: asked the Secretary of State for Commonwealth Affairs why citizens and residents of the United Kingdom visiting the Bahamas have their passports endorsed for a limited number of days, in view of the fact that citizens of the United States of America are accepted as visitors without passports.

Mrs. Hart: United Kingdom citizens may visit the Bahamas for periods up to three weeks without passports. United States citizens have been exempted from the requirement to have passports to encourage tourism, which is mainly with the United States. They are, however, required to produce evidence of nationality and to declare the period of their proposed stay. If a person presents a passport it is endorsed with the permitted period of stay.

Mr. Tilney: Why, then, is the passport of someone from Liverpool endorsed for staying four days—I saw it only last weekend—and why do British citizens appear to be treated in the Bahamas as second-class citizens?

Mrs. Hart: No, that is not so at all. This whole question is for the Government of the Bahamas since they have internal self-government, but the restrictions on British visitors are no more severe than those on Americans, who must provide proof of nationality.

Republic of Ireland (Taxi-Cabs)

Mr. Forrest: asked the Secretary of State for Commonwealth Affairs why taxi-cabs entering Eire still require a bond when all other forms of transport are now excused this requirement; and if he will make a statement.

Mrs. Hart: The arrangements for the entry of motor vehicles into the Republic of Ireland are the responsibility of its Government but I understand that regulations require a bond, not only for taxicabs but also for most types of commercial vehicles and omnibuses.

Mr. Forrest: Surely this is a terrific handicap to the few taxi owners in Northern Ireland and should be abolished immediately.

Mrs. Hart: I assure the hon. Gentleman that if he were to produce any evidence that these formalities were a real impediment to cross-border traffic, I should be prepared to consider telling the Government of Eire that that was so. These are the only grounds on which one could make representations to them. I do not think the hon. Gentleman has proved his case on that point.

Gibraltar

Mr. Channon: asked the Secretary of State for Commonwealth Affairs if he will make a statement about the situation in Gibraltar.

Mrs. Hart: Within Gibraltar the general situation remains unchanged, with the land frontier still closed to vehicles and merchandise though open to pedestrians including tourists and Spanish workmen.
We are considering what our policy should now be, in the light of the General Assembly resolution of 20th December, consistently with the interests of the people of Gibraltar which, as we made clear in New York, we regard as paramount. It would not he helpful if I were to go further at this stage.

Mr. Channon: What representations has the Minister or her right hon. Friend made to the Spanish Government in recent weeks about the present frontier restrictions?

Mrs. Hart: As I say, the frontier situation has not changed and there have been no new representations.

Commonwealth Countries (Diplomatic Relations)

Mr. Channon: asked the Secretary of State for Commonwealth Affairs how many Commonwealth countries do not have diplomatic relations with Her Majesty's Government.

Mr. Goodhart: asked the Secretary of State for Commonwealth Affairs what discussions he has had about the resumption of diplomatic relations with Tanzania.

Mrs. Hart: Tanzania is the only independent Commonwealth country which is not in diplomatic relations with Britain.
There have been no discussions with a view to resuming them. As my predecessor informed this House on 26th July, 1966, it is normal practice to look to the country which has broken diplomatic relations to take any such initiative

Mr. Goodhart: Is the hon. Lady aware that since Tanzania broke off diplomatic relations with us we are giving her £6 million of aid, which is more than the annual savings we are to make in Malta? Is she further aware that Tanzania has nationalised a great many British companies? As she has said that she wishes to be independent of foreign aid, will we therefore stop trying to force unwelcome aid down her throat?

Mrs. Hart: I would refer the hon. Gentleman to previous replies on this point. My right hon. Friend the Prime Minister said as recently as 27th January:
Aid, when it is a question of … teachers, hospital staffs and others … cannot and should not be switched on and off like a tap".

Mr. John Lee: Would my hon. Friend bear in mind that, although it may be the normal practice for a country which has broken off diplomatic relations to ask for their resumption, bearing in mind that many hon. Members on this side of the House have great admiration for President Nyerere, may I ask whether Her Majesty's Government will take steps to resume discussions as soon as possible?

Mrs. Hart: These matters are always extremely delicate. We should be very happy if we were to receive approaches from the Government of Tanzania.

Ghana (Assistance)

Mr. Tilney: asked the Secretary of State for Commonwealth Affairs what Great Britain has done and will do to help Ghana tide over the difficulties which the present Ghana Government inherited from the Nkrumah régime.

Mr. George Thomas: I have written to the hon. Member giving him details of the various steps we have taken and are taking to help the Ghana Government.

Mr. Tilney: I thank the hon. Gentleman for his letter, which I hope can be embodied in the OFFICIAL REPORT. Considering the economic condition of this country, would he do all he can to show that Great Britain is an old and real friend of the new Ghana which is trying to show the whole of Africa the benefits of sane government?

Mr. Thomas: I welcome the hon. Gentleman's observations. I have just returned from Ghana. I am well aware of the deep fund of good will which Ghana as a whole has towards this country. This Government is very anxious to sustain that good will and to do what we can to help Ghana.

Sir A. V. Harvey: Would the hon. Gentleman say how long the Government will allow Mr. Nkrumah to continue as a Privy Councillor? Does it not

make a nonsense of this high office to allow a man in exile who is despised by every Ghananian citizen to retain this right?

Mr. Thomas: That does not arise from this Question, although a lot of people would like to take his place in the Privy Council.

Swaziland (Constitution)

Mr. James Johnson: asked the Secretary of State for Commonwealth Affairs what political parties or organisations in Swaziland have been consulted about the new constitution.

Mrs. Hart: All political parties and organisations in Swaziland have been given full opportunity to express their views on the new constitution, both by written representations and by discussion with my hon. Friend the Minister of Aviation during his visit to Swaziland in October of last year.

Mr. Johnson: Would not my hon. Friend agree that to invite the views of parties is not genuine consultation? Is it not a fact that not one delegate to the Mbabane Committee is to the Left of the Imbokodvo, which is the Government party, and that the Left-wing parties feel that they have not had a chance to be in at the discussion and at this constitution-making?

Mrs. Hart: The parties which were represented on the Committee were those which had members in the Legislature. Apart from that, all the other parties and groups have had a real opportunity, which they have taken, to present their views both in writing and by making representations to my right hon. Friend and by discussion with my predecessor at the Colonial Office.

Oral Answers to Questions — MINISTRY OF POWER

Retail Coal Distribution

Mr. Eadie: asked the Minister of Power how many schemes for rationalisation and concentration of retail coal distribution are going ahead; and in what areas.

The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Freeson): There are 45 mechanised and 100


non-mechanised coal concentration depôts under construction or under examination by the interests concerned. They have a combined capacity of 7½ million tons a year, and are in many parts of the country.

Mr. Eadie: Is my hon. Friend aware that there is still some urgency about the matter raised in my Question? If he reads the Robson Report of 1958, he will see that there were 81 per cent. of private traders. The Report of the Prices and Incomes Board of last year showed that the position had worsened in that there were 12,000 private traders, which represents 83 per cent. Is it not time that this matter was treated with some urgency?

Mr. Freeson: I can assure my hon. Friend that there is considerable discussion and negotiation going on at present in the field of rationalisation in an endeavour to increase the number of coal concentration deôots throughout the country. We are treating the matter with urgency.

North Sea Drilling Operation

Mr. Hector Hughes: asked the Minister of Power if he is aware that in 10 years there have been 23 serious accidents on mobile drilling platforms exploring for oil in the North Sea, and that Norway's State Oil Council has proposed an international conference aimed at reducing the relevant dangers; if he will seek representation for the United Kingdom at that conference; and what relevant conditions he inserted into licences to drill granted by him.

Mr. Freeson: My hon. and learned Friend has got some of his facts wrong.
The magazine "Offshore" reported in its March, 1966, issue that there had been 23 serious accidents to drilling rigs in the last 10 years throughout the world. Of these only one—the collapse of the "Sea Gem" in December, 1965—happened in the British sector of the North Sea.
The Norwegian Petroleum Council has issued invitations to countries interested in offshore activities in the North Sea to attend an informal conference to discuss matters of common interest with particular emphasis on safety. The Conference

will be at official level and the Ministry will be represented.
Licensees are required to carry out operations in accordance with the relevant Institute of Petroleum Code of Safe Practice.

Mr. Hughes: Does my hon. Friend realise that he has missed the essential point of my Question, which relates to the relevant conditions in the licences? Will he ensure that serious accidents and cases of defective machinery are dealt with in this country by British workmen and not sent abroad as heretofore?

Mr. Freeson: I assure my hon. and learned Friend that I have discussed this in the Ministry. As I stated in reply to a similar Question when I was last at the Box, it is important to get repairs undertaken in the best manner and as speedily as possible, irrespective of where they are undertaken.

Oral Answers to Questions — TELEPHONE TAPPING (PEERS)

Sir T. Beamish: asked the Prime Minister whether his decision not to allow the telephones of peers to be tapped on the authority of the Home Secretary applies to peers generally or only to peers who sit as Members of the Upper House.

The Prime Minister (Mr. Harold Wilson): The statement which I made on 17th November extends to holders of peerages in receipt of Writs of Summons to the House of Lords.—[Vol. 736, c. 634.]

Sir T. Beamish: How does the Prime Minister square his high-handed and personal decision not to allow the telephones of peers and hon. Members to be tapped on the authority of a Secretary of State with the fact that he was Chairman of the Labour Party in 1961, when, it is said, at least a dozen Labour Members had their loyalty investigated by the Special Branch, including having their telephones tapped, at the request of the Labour Party?

The Prime Minister: That may have been said at the party conference, but I know nothing about any such request. This is a Question which, if the hon. Gentleman was as interested then as he is


now, he should have put to his own Home Secretary at the time. This is not highhanded, but an act of government within the control of Government. I gave the House my reasons. I said that on balance—very much on balance—I thought the previous practice was undesirable.

Oral Answers to Questions — MR. KOSYGIN (VISIT)

Mr. Marten: asked the Prime Minister if he will make a statement on the visit of Mr. Kosygin.

The Prime Minister: I would refer the hon. Member to the Statement I made to the House yesterday.—[Vol. 741, c. 109]

Mr. Marten: Now that the Vietnam question has become considerably less delicate than it was at this time yesterday, can the Prime Minister tell the House whether, during Mr. Kosygin's visit, the Hanoi Government made any significant gesture towards getting peace talks going?

The Prime Minister: There are a number of Questions later on the Order Paper about Vietnam. With your permission, Mr. Speaker, I shall ask leave to answer them at the end of Questions.

Mr. Murray: Did my right hon. Friend have, during the visit of Mr. Kosygin, any discussions about the possibility of an early summit meeting?

The Prime Minister: No, Sir. That was not discussed at this stage.

Oral Answers to Questions — VIETNAM

Mr. Norwood: asked the Prime Minister in view of the fact that since the United States are unable to win the war in Vietnam by conventional means sooner or later pressure will be brought for the use of nuclear weapons, if he will now as a precautionary measure give an assurance that Her Majesty's Government will refuse to acquiesce in any proposal on the part of the United States Government to use these weapons.

The Prime Minister: This is a hypothetical Question. I have no reason to think that either side would ever contemplate the use of nuclear weapons in Vietnam.

Mr. Norwood: While acknowledging that it is a hypothetical Question, it is not so hypothetical that it does not deserve an answer. Could my right hon. Friend not give a clear and blunt assurance, whatever may be his doubts about the intentions of the United States Government and whatever may be their intentions, that he will never give his sanction or acquiescence to the use of these weapons in that country?

The Prime Minister: I am sure that the House would deplore the use of nuclear weapons in Vietnam. I have said that I think that this is hypothetical. There is no suggestion of using them, and that is why I gave the Answer that I did.

Mr. Philip Noel-Baker: Can my right hon. Friend confirm that the use of gas for defoliation kills the forests for 50 years——

Mr. Speaker: Order. This is a Question about nuclear weapons.

Mr. Noel-Baker: With great respect, Mr. Speaker, the Question is about both conventional and nuclear weapons. In Vietnam, gas is being regarded as a conventional weapon. Therefore, may I ask the Prime Minister if he can confirm that the use of gas for defoliation kills the forests for 50 years, that the use of gas for destroying crops starves the children but not the fighting Vietcong? Is this a good way of promoting the pursuit of life, liberty and happiness in future Vietnam?

The Prime Minister: Without notice, I could not say whether my right hon. Friend is right about the effect of particular gases on the life of trees and forests. If he will put a Question down to the appropriate Minister, I am sure that we shall do our best to give him an answer.

Oral Answers to Questions — PRIME MINISTER'S ADVISERS

Mr. Peyton: asked the Prime Minister if he will state the rules governing the publication by his advisers of books on subjects within the area of their official responsibility.

The Prime Minister: My advisers are subject to the normal rule that civil servants who wish to publish a book upon a


subject connected with their official duties must obtain the previous consent of the head of their Department.

Mr. Peyton: I am very grateful for that Answer, but may I ask the Prime Minister whether he is aware that I put the Question down when I first heard of Dr. Balogh's book, "The Economics of Poverty", and then unreasonably but hopefully assumed that it might contain an explanation of the economic policies of the present Government?

The Prime Minister: Since my Answer made it clear that these rules require consent by the head of the Department, since this book was written a very considerable time ago, and since he had consent, the point raised by the hon. Gentleman does not arise. But as he has taken such a deep interest in this, I hope that he will read the book right through. He will learn a lot from it.

Oral Answers to Questions — LINER TRAINS

Mr. Hunt: asked the Prime Minister what reply he has sent to the representations on the subject of liner trains recently made to him by the Chairman of the Road Haulage Association.

The Prime Minister: As the Answer is rather long, I will, with permission, circulate it in the OFFICIAL REPORT.

Mr. Hunt: Is the Prime Minister aware that here was an opportunity for him to show some real leadership, rather than the kind of wriggle and waffle that we have had to put up with for the last two years? Is the Prime Minister aware that there are still 200,000 lorries barred from liner train terminals at the whim of one union? How much longer is the Prime Minister going to condone this scandalous situation?

The Prime Minister: The hon. Gentleman has got his timing of wriggle and waffle wrong. The sum of £6 million was authorised in March, 1964, by the right hon. Member for Wallasey (Mr. Marples) but he imposed the condition that no money was to be committed until the N.U.R. had agreed to open terminals. It was this Government who, in April 1965, authorised the Board to go ahead with construction. My right hon. Friend

is in close touch with the union. There has been a considerable easement in recent months, and she is pressing the matter further.

Mr. Peter Walker: Is the Prime Minister aware that in his statement on 20th July last on the economic crisis he said that one of his measures was his determination to see that the freight liner trains operated at open terminals. Now, six months later, we see the Transport Holding Company spending £500,000 to appease the unions in their closed terminals policy. Is the Prime Minister going to take action instead of just preaching on this subject?

The Prime Minister: The point is that we have been taking action, unlike the Government which the hon. Gentleman supported. I have given the facts on this. Thirty thousand freight liner containers have been carried since November, 1965.
With regard to the question of terminals, there is now agreement, not only with the N.U.R. but with the union representing lorry drivers, on the London-Scottish route. My right hon. Friend had a meeting with the unions concerned earlier this month. She is pressing the matter further. She is making progress. It is a difficult matter, but progress is being made.

Mr. Spriggs: Is my right hon. Friend aware that railwaymen are operating the liner trains, and that they are a great success?

The Prime Minister: Yes, Sir, and I think that greater realisation all over the country that the operation of liner trains is a success, and is going to help to provide employment and greater profitability for these services, is beginning to break down the opposition in the railway union concerned to the question of liner trains.

Mr. Heath: Will the prime Minister address himself to the question of liner trains operating at open terminals? On 20th July he pledged himself to operate that policy. Yesterday, by the complete nationalisation of Tartan Arrow services, he completely succumbed to blackmail from the unions. He cannot say that progress is being made with the unions when yesterday his Minister proved the reverse.

The Prime Minister: Progress is being made on the question of open terminals. I have said that it is a difficult thing. These matters are not settled by the right hon. Gentleman's usual suggestion about passing a law about them. It is quite clear that the right hon. Gentleman's concern is more about public acquisition than about whether the open terminals operate or not.

Mr. Ogden: May I ask my right hon. Friend whether this programme was really initiated by the right hon. Member for Wallasey (Mr. Marples), and, as he is now redundant, whether we can offer him some useful employment?

The Prime Minister: I said that the right hon. Gentleman authorised £6 million in March, 1964. To that extent, of course, it was initiated by him, but, as I said, he imposed a condition which we then withdrew so that the work could proceed.

Mr. Heath: Can the Prime Minister say how many open terminals are operating as a result of the progress made?

The Prime Minister: No, Sir. If the right hon. Gentleman puts down a Question on that, I shall answer it. [Interruption.] The right hon. Gentleman obviously thinks that this is all very funny. [HON. MEMBERS: "No."] Of course, he does. [HON. MEMBERS: "Answer the question."] The right hon. Gentleman is more concerned—and we know the kind of briefing that he gets from his hon. Friend on these matters—to attack the Government than to get results.—[Interruption.]

Mr. Speaker: Order. I want to hear the question and answer.

Mr. Hunt: In view of the totally unsatisfactory nature of that reply, I beg to give notice that I shall seek to raise the matter on the Adjournment.

Mr. Kenneth Lewis: On a point of order.

Mr. Speaker: Order. The hon. Member can raise his point of order at the end of Question Time.
Following is the Answer:
The Association has been told that the Government fully support the need for the fullest use to be made of the freight liner system; that

my right hon. Friend the Minister of Transport is making every effort to encourage the wider availability of terminals; that the Government are continuing to press their views on those concerned; and that in my judgment it would be better to allow the work which is already being put in on this subject to continue rather than for me to call a meeting of the kind the Association has suggested.

Oral Answers to Questions — CHANCELLOR OF THE EXCHEQUER (SPEECH)

Mr. Bruce-Gardyne: asked the Prime Minister whether the public speech of the Chancellor of the Exchequer in Cardiff on 23rd January on investment represents the policy of Her Majesty's Government.

The Prime Minister: Yes, Sir.

Mr. Bruce-Gardyne: Has the Prime Minister noticed that his right hon. Friend referred in his speech to firm and definite policies for the regions? Has the Prime Minister noticed that the result of these policies is that unemployment in Scotland is now running at about 90,000, and that the latest count for emigration is running at the record level of 50,000 a year? What is the Prime Minister going to do now to discourage the Scots, to coin a phrase, from voting with their feet?

The Prime Minister: My right hon. Friend referred to the regions and to the specific new measures taken during the past few months further to increase incentives for the regions. The hon. Gentleman will know not only that Scotland has suffered less from unemployment than in previous similar periods under our predecessors, but also that the percentage of new factories going to Scotland out of the total has increased very remarkably indeed compared with 1963–64. These are the measures that we are taking.

Oral Answers to Questions — EUROPEAN COAL AND STEEL COMMUNITY

Mr. Ridley: asked the Prime Minister which Minister is responsible for conducting negotiations with the European Coal and Steel Comunity.

The Prime Minister: If, as I assume, the hon. Member is referring to possible future negotiations, the question does not yet arise.

Mr. Ridley: Will the Prime Minister give an assurance that the present Minister of Power will not conduct these negotiations? Is the right hon. Gentleman aware that the Minister of Power consistently refused to make any concessions which might have altered the Steel Bill to make it acceptable to the signatories of the Treaty of Rome?

The Prime Minister: I give an assurance that when the hon. Gentleman and his hon. Friends begin to address themselves for the first time in two years to matters of policy and not petty sniping at personalities I shall listen to him and some of his hon. Friends.

Mr. Barber: Will the Prime Minister recognise that the points which we put to the Minister of Power in those debates and which were turned down were based on advice which we received from the headquarters of the European Coal and Steel Community?

The Prime Minister: It is not for me to inquire where the right hon. Gentleman gets his briefs from. Some of us, in all these matters, including negotiations with Europe, like to feel that we are speaking for Britain and not necessarily for the European Coal and Steel Community. The Amendments which were put down by the right hon. Gentleman and not accepted were rejected by the House as a whole.

Oral Answers to Questions — FOREIGN OFFICE POLICY (DEFENCE)

Mr. Bruce-Gardyne: asked the Prime Minister if he will delineate the precise line of demarcation between the responsibilities for Foreign Office policy in matters of defence of his right hon. Friend the Member for Dundee, East (Mr. George Thomson) and Lord Chalfont, respectively.

The Prime Minister: I would refer the hon. Member to the Answer I gave on 23rd January to a Question by the noble Lord the Member for Hertford (Lord Balniel).—[Vol. 740, c. 281.]

Mr. Bruce-Gardyne: In that Answer the Prime Minister said that his right hon. Friend was responsible for policy to N.A.T.O. and Lord Chalfont for policy towards defence. Why

is N.A.T.O. divided from defence? Is not this a pretty curious arrangement? While the Prime Minister is about it, can he explain why his right hon. Friend was taken away from dealing with Europe where he had established such valuable contacts in the past nine months?

The Prime Minister: I think I am right in saying that the hon. Gentleman was once in the Foreign Office. He will know the problems when it is necessary to have some division of the work on a regional basis and some on a functional basis. The Foreign Office has great responsibility in the matter of advising on questions of defence. It was right that these defence questions, including disarmament, which are very closely linked, should come in the junior Ministerial level under the care of my noble Friend, but all of them act under the direction of the Foreign Secretary.
With regard to the second part of the question, I felt that it was necessary to strengthen not only the economic department of the Foreign Office but to have more and continuing responsibility for European economic questions, so my right hon. Friend, who was the former Minister of Aviation, has gone to them. My right hon. Friend the Member for Dundee, East (Mr. George Thomson) has responsibilities over a wide field including N.A.T.O.

Mr. Michael Foot: Is my right hon. Friend aware that the indication that he has given that the hon. Member for South Angus (Mr. Bruce-Gardyne) was removed from the Foreign Office is the best information that we have had from that institution for years?

QUESTIONS TO MINISTERS

Mr. Kenneth Lewis: On a point of order. In view of the fact that the Prime Minister is clearly incapable of giving us an answer on open terminals, may we have it from the Minister of Transport, who is sitting just alongside him and could have given him the answer?

Mr. Speaker: This shows how right I was not to take a bogus point of order during Question Time. I take the view that hon. Members have gone to great pains to put their Questions down and to


frame their supplementaries during the 60 minutes of Question Time. I try to protect them if I can.

Mr. Hugh Fraser: On a point of order. Today the Prime Minister had three Questions on telephone tapping—Numbers 1, 16 and 19. He chose to answer only Question No. 1. May I assume that he is afraid to answer the other Questions?

Mr. Speaker: The second half of that spoils the point of order that the right hon. Gentleman is trying to raise. On the point of order—it is for the Minister to decide how he groups the Questions that he chooses to answer.

Sir Harmar Nicholls: On a point of order. I understand your reluctance to have Question Time interfered with, Mr. Speaker, but is it now a new rule that on no occasion may points of order be raised during Question Time?

Mr. Speaker: No. Mr. Speaker mentioned no absolute rule. The House must have confidence in Mr. Speaker. I know that it is sometimes difficult.

VIETNAM

The following Questions stood upon the Order Paper:

Mr. MICHAEL FOOT: To ask the Prime Minister if he will make a statement on the discussions he has had with Mr. Kosygin about attempts to secure a settlement in Vietnam.

Mr. RANKIN: To ask the Prime Minister what discussions he had with Mr. Kosygin on the situation in Vietnam during his visit to London; and if he will make a statement.

Mr. HEFFER: To ask the Prime Minister whether he will make a statement on the visit of Mr. Kosygin, with particular reference to the discussion on the situation in Vietnam.

The Prime Minister (Mr. Harold Wilson): With permission, Mr. Speaker, I will now answer Questions Nos. Q17, Q21 and Q22.
I apologise for the length of this Answer but I believe this to be necessary because of its importance and complexity.
As I told the House yesterday, Mr. Kosygin and I devoted the major part of our discussions to the problem of Vietnam. Our discussions were urgent and constructive. They were also confidential and must remain so, as must equally my contacts with the President of the United States.
My right hon. Friend and I made a sustained effort to try to secure conditions during the Vietnamese New Year truce period which would make possible negotiations for a settlement. I believe there were moments when this could have been very near.
The tragic disappointment of these hopes for the truce period which became public last night must not, and will not, deter us from pressing on for a solution. As I told the House yesterday "if the present opportunity is missed we must not give up hope; the road to a solution remains open".
That is the position.
I do not underrate the renewed dangers that accompany the resumption of the fighting; and we must all deeply regret that the Tet period, the period of the Vietnamese New Year, was not utilised to create the conditions that were needed for a move to the conference table. In particular, the massive southward movement of troops and supplies in the north, on a scale far greater than in the Christmas, or indeed in any previous, cease-fire, threatened to create a severe military unbalance. It also made it harder for the Americans to believe that the North Vietnamese leaders wished to use the truce for an effort to peace rather than for a further effort in war.
As I made clear yesterday, what is lacking for a settlement is, first, enough of a general realisation that sooner or later there must be a political settlement and, secondly, the necessary degree of trust and confidence on the part of each of the nations fighting in this war about the sincerity of the desire of the other to work for a negotiated political settlement.
North Vietnam will still not seize the present opportunities for negotiation because, presumably, they do not accept the sincerity of the repeated American statements that when negotiations take place they will be unconditional or about


American willingness, given appropriate guarantees, to stop the bombing.
Equally—and suspicions have been aggravated by the military movements during Tet—the Americans do not for their part feel able to trust the North Vietnamese to negotiate with genuine intent and to refrain from using a period of negotiations to build up military strength and compel South Vietnamese, American, Australian, New Zealand and other forces to fight with their hands tied behind their backs.
Trust has got to be built up. For my part, if this needs saying, I accept one hundred per cent. American sincerity to negotiate for peace. And I must add this. I believe that the North Vietnamese are also genuine in their desire for peace. They equally are concerned, at the same time, to avoid a situation in which they feel they would be leaving perhaps 100,000 North Vietnamese at risk in the south, denuded of necessary supplies.
It is to bridge what I described yesterday as a very small remaining gap by creating the necessary confidence and guarantees both ways that my right hon. Friend and I have been so active in this past week to do our best to see that the breathing space provided by Tet was used. The deep concern all of us feel that this has not proved possible must not blind us to the fact that peace is attainable now at any time on the basis on which we have been working.
These disappointments should not drive any of us into panic measures, reversals of policy or into the delusion that peace can be secured by dramatic but ineffectual declarations. Those of us who have a rôle to play in this matter have a duty to keep cool and to keep our eyes fixed on the goal we set ourselves last week, to use the influence we possess to prevent the bitterness as well as the fighting from escalating, and to begin again, however difficult the circumstances, to create two-way confidence—and to remember above all that our objective is not to strike allegedly moral postures or to make unhelpful denunciatory declarations—our objective is to secure peace.

Mr. Michael Foot: I certainly appreciate—[Interruption.]

Mr. Speaker: Order. This is a very serious matter.

Mr. Foot: I certainly appreciate the efforts made by the Prime Minister to try to secure a settlement of this dispute, but will he recognise that there is a widespread sense of outrage throughout the country that the United States Government have refused to respond to the appeal made by the Secretary-General of the United Nations for an unconditional and unqualified stopping of the bombing—an appeal which I trust was supported by my right hon. Friend during recent days? Will he now say that he will give unqualified support for that appeal, which has been made on behalf not merely of many members of the United Nations—and probably a majority of nations there—but of vast numbers of people throughout this country?

The Prime Minister: My hon. Friend is quite right to express his feelings and to speak for others about the resumption of the bombing, but on the broader question that he raised I must make this clear: my right hon. Friend and I have been living very close to this subject for the last seven or eight days. I think that we know most of what is going on. I think we know exactly what is required—and it is not a great deal—to get the parties to the conference table. My hon. Friend must make his own decision, but I do not believe that what he has proposed would in any way help to secure a settlement. I am saying this with some knowledge of what it is about. If I thought that it would, if I thought that that were the way, that full association with what U Thant has said was the way to get peace, I would follow that course tomorrow, but I know enough about it to know that that is not the road to follow.

Mr. Rankin: Would my right hon. Friend not agree that the spontaneous welcome accorded Mr. Kosygin in Great Britain last week wherever he went was a reflection of the widespread support of his policy in Vietnam—[HON. MEMBERS: "Oh."]—of course it was—and at the same time, an obvious criticism of the policy which is being followed by America in that part of South-East Asia? Does that fact not have some influence on the action which he ought to take at this time?

The Prime Minister: I think that my hon. Friend misconceives both the purpose of Mr. Kosygin's visit and the


reactions to it. I believe that the great warmth of his reception, as I said yesterday, was due to his own manner and charm in going around the country and to the great desire of all our people, whatever their political points of view on Vietnam or anything else, to see a closer rapprochement between Britain and the Soviet Union, a desire which I believe has been achieved to a very high degree by the communiqué published yesterday. I do not think, therefore—in fact I would very much hate to think—that Mr. Kosygin's reception was limited to support one way or another for a particular aspect of policy, however important.

Mr. Heffer: Is my right hon. Friend aware that his statement this afternoon is very disappointing? Was he told by the Americans before the bombing that it was likely to take place, or was he kept in the dark? If so, how does this leave our so-called special relationship with the United States? Is it not clear that they do not give a fig for the opinions of this Government? Is it not time that we told the Americans quite categorically that we do not go along with them and that we dissociate ourselves entirely from their policy?

The Prime Minister: My right hon. Friend and I were in full possession of all relevant facts, both current and prospective, and they did not apply only to the facts which we got from the United States. The problem here—I will not go into any of the details or proposals which we were working on and which still stand open—is that it was clear to everyone that if both sides failed to take advantage of the opportunity of the Tet truce, there would be a return to the conditions prior to the cease-fire. That was clear to everyone. I have given my account of why things went wrong in that connection.
My hon. Friend is absolutely wrong to suggest that the Americans pay no attention to us. If we were to follow his proposal—he is free to follow it, but I am not—that might have the effect that we would have little influence in any quarter in this matter.

Lord Balniel: Mr. Kosygin frequently made it clear in his public speeches that the Soviet Union is the major supplier of arms to the North Vietnamese forces.

Did he, in discussion, also make it clear that the Soviet Union still considers itself as having responsibilities as the Co-Chairman of the Geneva Conference? Did he suggest any specific initiative to bring the contending parties to the negotiating table? The Prime Minister also said that he knew exactly what is required to bring the parties to the negotiating table. Could he give us some indication of what is in his mind?

The Prime Minister: The noble Lord will understand my difficulties here, including the difficulties of saying exactly what Mr. Kosygin said to my right hon. Friend and myself in these very lengthy negotiations. On the main part of his question, in addition to being, of course, an ally of North Vietnam and a supplier of arms, Mr. Kosygin and his whole Government obviously take very seriously their responsibilities as Co-Chairman.
I think that the result of the examination which we have made in these past few days would suggest that their view is that there must first be a willingness to go to the conference table on the part of the main parties to the fighting. Then, I am certain—in fact I know—that Mr. Kosygin, or, in this case, Mr. Gromyko, would join my right hon. Friend in taking any measures to make these negotiations a reality. There are various ways, which we cannot pursue at this time, in which this can be done, but there is a prior condition required for that kind of activation.
On the question of what proposals might be put forward, it is not a question of proposals being put forward. There is an initiative; there is a plan—I cannot tell the House what it is and I am sure that the noble Lord will not press me for it—which would bring peace tomorrow and would require a very small move to activate all the very complicated machinery which could bring us to peace.

Sir C. Osborne: Despite the Prime Minister's natural disappointment that his efforts last week should have failed, is he aware that most people hope that he will continue to seek for peace? Does he think that peace can be secured in Vietnam without co-operation from Peking? When conditions become normal there, will he do his best to get all the influence he can brought to bear from that quarter to secure peace?

The Prime Minister: I thank the hon. Gentleman for what he said at the beginning of his question. On the second part, he knows the difficulties probably as well as anyone, from his contacts in that part of the world, and, of course, it is not a currently realistic proposal. The hon. Gentleman will remember that, when the Commonwealth Peace Mission was proposed, it was proposed that the Commonwealth Prime Ministers should visit Peking, Moscow and Washington as well as North and South Vietnam.

Mr. James Davidson: What was the exact source of the information that there were massive troop movements coming south during the truce period from North Vietnam?

The Prime Minister: It is not usual, of course, to give the sources of this information, but I am not aware of anyone who is denying this——

Hon. Members: Oh.

The Prime Minister: My hon. Friends may——

Mr. Orme: Give us the source.

The Prime Minister: It is not usual to give the source in this matter——

Mr. Orme: Why not?

The Prime Minister: I am satisfied about the details and figures of movements, which were on a very large scale. I still believe that it would have been possible despite that, if we could have had one small move, to have activated the whole peace proposals and for the Tet truce to have continued until we got them around the conference table.

Mr. Mendelson: While it is clearly emerging that the most positive part of last week's work was the co-operation between the two Co-Chairmen to try to find a way, is it not equally clear that when Mr. U Thant said yesterday, after the extension of the suspension of the bombing, that he welcomed it and that what is needed now is a quiet period of a few weeks to allow, not declamations, but quiet diplomatic work, is not that the path of wisdom and is it not regrettable that the bombing should have been resumed now? Should not my right hon. Friend give complete support to U Thant's proposal?

The Prime Minister: No one has greater respect for U Thant than I. I think that he is a personal friend of many of us in the House. I agreed with him when he welcomed the suspension of the bombing and the other military activities. That is why it was such a bitter disappointment that we were not able to seize on the urgency of those few days of truce to get a settlement. That is why the task is now harder, because of the danger of bitterness, although I believe that everything which we discussed last week is as relevant today—leading to a cessation of the bombing—as it would have been last week, leading to a decision not to resume the bombing, and it is just as possible, if the will is there. Not much is needed to activate all this. Therefore, with the disappointment which my right hon. Friend and I felt—I know that my hon. Friend shares it—I am also disappointed that these things happened during Tet which fouled the atmosphere and also that we did not have a little more time to get them to the conference table.

Mr. Marten: Is it not during these quiet periods that the North Vietnamese abuse the offer of a peaceful time? Would the right hon. Gentleman answer the question which I put earlier—without going into details, was there any significant gesture or move by Hanoi during Mr. Kosygin's visit to get the talks going?

The Prime Minister: I think the hopes which were built up last week—I have not lost them, despite the disappointment—will be best fulfilled if I say as little as possible of the exchanges last week and the part played by Mr. Kosygin or anyone else in them.

Mr. John Hynd: In view of the Prime Minister's satisfaction at the fact that both sides—the Vietcong, the North Vietnamese and the Americans—are anxious for peace, in view of the intervention of U Thant and in view of the fact that for the first time we are satisfied that the Russians are anxious to take part in recalling the Geneva Conference, is this not an opportunity for the intervention of the United Nations to provide the necessary assurance to both sides which would enable the Geneva Conference to be resumed?

The Prime Minister: I hope that my hon. Friend was not suggesting that there was ever any doubt about the willingness


of the Soviet Union to play their full part as Co-Chairman. It is not felt that a Co-Chairman's initiative in that form is the way to start things off. There must be an act of will on the part of the main parties to the fighting, after which the Co-Chairman would, I am sure, go into action in any way that would be helpful to consummate what had been begun. In regard to my hon. Friend's suggestion about the United Nations, as I have said more than once in this House, we all know the difficulties that exist about putting it through the machinery of the United Nations. Obviously the help of the Secretary-General is extremely valuable, but I believe that the lines on which we have been working in the past week are the right lines and, as I have said, those lines remain open.

Mr. Longden: While sympathising with the Prime Minister in his struggle for peace against so many of his hon. Friends—[Interruption.]—is it hypercritical to suggest that Mr. Kosygin could have helped the end which we all have in view by taking time off from trying to detach us from our allies and publicly suggesting and exhorting his protegé Ho Chi Minh—[HON. MEMBERS: "Sit down."]—to go to the conference table?

The Prime Minister: I wish that the hon. Gentleman, in the manner of his question and in its content, was one-tenth as helpful as Mr. Kosygin and as my hon. Friends. I hope that, despite the hon. Gentleman's cynicism and the Motion which he has on the Order Paper, he is not attributing a lack of sincerity to my hon. Friends. I thought I knew that all hon. Members, on both sides of the House, passionately desired to see peace in Vietnam. There are different ways of achieving it. My hon. Friends have one way, and I have said that if I thought it was the right way, I would be with them tomorrow in doing it that way. I do not believe that it is the right way, although I do not doubt their sincerity in putting it forward. What the hon. Gentleman said does not provide a way at all, except to abuse a very distinguished visitor to this country.

Mr. Atkinson: Would not my right hon. Friend agree that it would be right and proper for him now to say whether or not the information which he has about the North Vietnamese movement

of troops and supplies during the truce period was gained from one of the belligerents? Would he say whether the source of information was, in fact, the Americans?

The Prime Minister: I have said that it is not usual to give information about the source of information, but I assure my hon. Friend that I did not obtain it by pure introspection and that I am satisfied as to its accuracy.

Mr. Heath: Is the right hon. Gentleman aware that we support him and the Foreign Secretary not only in the work they have been doing but also in the efforts which they have told the House they will continue to make to try to bring about a settlement? Is he further aware that I believe him to be right in that he will not help this process by either condemning what the United States are doing or by calling on them for an unconditional cessation of bombing, although Mr. Kosygin himself in public made this a condition of any successful negotiation? Would not the right hon. Gentleman agree that the best hope lies in being able to show one side that if the bombing ceases, the other side will be prepared to cease reinforcing, and that from that position of diplomacy, further action might ensue?

The Prime Minister: I thank the right hon. Gentleman for the last part of his remarks, in which he put his finger on one of a series of very complicated problems; and, of course, I agree with him. It is right that this must now be pursued as far as possible by private and secret contacts—Government contacts, of course—and not by public declarations.

LESLIE PARKES (ARREST)

Mr. Hogg (by Private Notice): asked the Secretary of State for the Home Department what action he proposes to take consequent upon the report of the Chief Constable of Stoke regarding the circumstances of the arrest of Mr. Leslie Parkes.

The Secretary of State for the Home Department (Mr. Roy Jenkins): I fully understand the concern which is felt in all parts of the House about this case. I share this concern. As soon as I saw the Press accounts, I asked for a report


from the Chief Constable of Stoke-on-Trent, who has told me that he is causing the circumstances to be fully investigated by a senior officer of another force and that he will then consider what disciplinary action would be appropriate. In view of my appellant responsibility in police discipline cases, the House will, I believe, understand that it would be wrong for me to comment further.

Mr. Hogg: While fully accepting what the right hon. Gentleman said in the last words of his Answer, would he, however, confirm his view, which I believe is widely held, that unless one is dealing with a very dangerous professional criminal, which is not the case here, it only undermines the confidence we all wish to feel in the Police Force to lure a man into a police station by means of a deliberate untruth? Would not he agree that one is not dealing here with a serious professional crime, and that even a suspect is entitled to be treated in good faith?

Mr. Jenkins: I think that that is so, and that was probably felt to be so by the Chief Constable himself, which was the reason why he issued his forthright statement yesterday and has acted as promptly and vigorously as he has in this case.

Mr. Ashley: Would not my right hon. Friend agree that this prompt admission by the Chief Constable of Stoke-on-Trent is to be welcomed and that it will facilitate early and effective action against those responsible? However, would not he also agree that it would be deplorable if this admission were to be used as a basis for a successful attack upon the police of Stoke-on-Trent or the police throughout the country?

Mr. Jenkins: I very much hope that that will not be so and I do not believe that it will be so. My view is that when the police show, as they have in a case like this, their great desire to deal with any possible faults, this can do nothing but help the reputation of the police throughout the country.

Mr. Powell: Would the right hon. Gentleman make it clear that the inquiry to which he referred in his Answer is not in derogation of the Government inquiry which was promised yesterday by a

Minister representing the Defence Department?

Mr. Jenkins: I believe that this is an entirely separate matter relating to circumstances following the arrest of Mr. Parkes and that it in no way touches on that other matter. This is a question of discipline within the Stoke-on-Trent Police Force.

Mr. Shinwell: There are several aspects of this case which appear to need investigating by my right hon. Friend's Department and also by the Ministry of Defence. Is my right hon. Friend satisfied with the reports and pictures which have appeared in the Press of Mr. Parkes being handcuffed to a military policeman, with another policeman with a pick-handle to the ready? Surely this is not the kind of thing that we expect in this country. Is he aware that this is not a police State, and will he consult his right hon. Friend the Secretary of State for Defence in order to put an end to these most obnoxious proceedings?

Mr. Jenkins: I take note of my right hon. Friend's remarks. The conditions relating to the present custody of Mr. Parkes are inevitably a matter for my right hon. Friend, with whom I am in consultation.

Mr. Powell: Further to the right hon. Gentleman's reply to my question, would he be good enough to look at the terms in which the Government inquiry to which I referred was promised yesterday?

Mr. Jenkins: I will certainly look at those terms. I do not believe that there is any misunderstanding or difference between us here. This is a question of police discipline, for which I am ultimately responsible and about which I am answering today. There is a separate question which my hon. Friend the Under-Secretary of State for the Army answered yesterday.

Mr. Alexander W. Lyon: Would not my right hon. Friend agree that, as the Chief Constable of Stoke said that it was completely unnecessary to adopt this ruse, as Army personnel had full power to arrest this man, there may be an explanation for the somewhat surprising manœuvre of the inspector which would show that, though misguided, he was acting from proper motives?

Mr. Jenkins: I would certainly not wish to say anything in answer to that question which might in any way impair my appellate responsibilities which I mentioned in my original Answer.

Sir Knox Cunningham: Can the right hon. Gentleman say whether, if the photographs mentioned had appeared in connection with a civil case, there would have been some Question of contempt of court? If so, is there anything comparable in the case of a military tribunal?

Mr. Jenkins: I would hesitate to advise the House about this. Had it been a civil case, I think that it would have been for my right hon. and learned Friend the Attorney-General to consider the question of contempt of court.

Mr. Thorpe: Can the Home Secretary say a little more about the scope of the inquiry? Has he seen reports alleging that a military spokesman said yesterday that Parkes was invited to go to the police station because it was in his own interests? Apart from this somewhat odd evaluation of his own interests and inclinations, in so far as this gives some indication of collusion between the civil and the military authorities will the inquiry be sufficiently wide in scope to investigate that matter?

Mr. Jenkins: As I said in reply to the right hon. Member for Wolverhampton, South-West (Mr. Powell), there are two separate issues. What the inquiry is concerned with, and properly concerned with, is a disciplinary offence within the police force of Stoke-on-Trent

Mr. Hogg: May I ask the right hon. Gentleman a question which may exceed the rôle of his own office? Does there not come a point in all these cases when, irrespective of the ultimate merits, the Government ought to step in and realise that the authorities have made such a mess that they ought to drop the matter?

Mr. Jenkins: The Government are dealing with the disciplinary aspects of the matter as quickly and as effectively as they possibly can.

Orders of the Day — COMPANIES BILL [Lords]

Order for Second Reading read.

4.2 p.m.

The President of the Board of Trade (Mr. Douglas Jay): I beg to move, That the Bill be now read a Second time.
The Bill was introduced a year ago with only 45 Clauses. It is now reintroduced here, after examination in another place, with 96 Clauses and 34 pages of Schedules. As I think all of us on both sides of the House agree on the main purposes of the Bill, all will, I hope, share my dilemma of ensuring that the Bill is long enough to do what most of us want to do urgently, and not so long as to fail to reach the Statute Book during the present Session. I have already, to meet the urgent need to check abuses in the insurance industry on the one hand and, on the other, to respond to suggestions from hon. Members and others, more than doubled the length of the Bill. I think that it is now quite long enough if we are to be sure of enactment this Session.
The reason why many further changes are omitted, though some may be desirable on sheer merit, is not necessarily that a case cannot be made out for them, but that they are less urgent and that a Bill fully revising our company laws after 20 years would need well over 200 Clauses at least. We seem to reform our company law in this country about every 20 years—the last major Act dates from 1948—usually during Labour Governments, it seems, between which there are, apparently, periods of deep slumber in this matter. This time we must all be grateful to the Jenkins Committee without which the politicians, or, at any rate, most of them, would be almost powerless in this matter.

Sir Gerald Nabarro (Worcestershire, South): The Jenkins Committee was set up by the Tories.

Mr. Jay: It was not merely set up by the Tories, but it reported during the period of the Tory Government, without any response in legislation. The exhaustive labours of that Committee remain the starting point of the Bill.
We have gone beyond Jenkins now in quite a number of reforms, but we have not tried, for the reasons which I have given, to enact everything from that Report in one Bill. Since there have to be limitations, the limitations must be decided according to some principle and some theme. The theme which we have chosen is the inclusion in the Bill of proposals for much greater disclosure of information by limited companies together with other provisions which are the most urgent in practice on other grounds. Proposals which do not pass either of these two tests we have felt bound to omit.
This does not mean that we are abandoning them. It means that we are proposing to embody them in further legislation, which we intend to introduce during the present Parliament. Nor do we stop at that. I am hoping to legislate for wider reforms in the structure and philosophy of our company law. I think that it is time—it has hardly been done for 100 years—to re—examine the whole theory and purpose of the limited joint stock company, the comparative rights and obligations of shareholders, directors, creditors, employees and the community as a whole.
At present, there would not be enough general agreement, quite apart from time, to legislate radically on all this and, therefore, I am putting in hand a systematic review of all these issues. I hope to make a statement shortly about the way in which the review will be handled, but we shall certainly be inviting views from all those expert, or less expert, including bodies outside the Government, who are interested.
The most sweeping reforms in the Bill ensure, as I have said, greater disclosure of information and the most sweeping of all is the abolition of the exempt private company. About 75 per cent. of the 500,000 companies in this country are at present exempt private companies, so that this provision alone means that nearly 400,000 companies will for the first time have to file their accounts with the Registrar of Companies, where they can be examined by the public, disclosing in them both the information formerly disclosed by public companies and nonexempt private companies and the additional information required by the Bill.
The 1948 Act attempted to exempt small family businesses, but in practice all sorts of companies, very far from being small family companies in some cases, have taken advantage of this to avoid disclosure. It will still be open for any company to choose to be either a limited company and accept the obligations of disclosure, or an unlimited company and avoid them. That seems to be fair. Limited liability is, of course, to the general advantage and has made a huge contribution to economic growth in this country over many generations. But it is also a great privilege conferred by Parliament on privately-owned business, and Parliament and the public can reasonably expect limited companies to accept obligations in return. That is our justification for imposing this new duty on more than 400,000 companies.
I also regard the far-reaching proposals for greater disclosure as a further contribution to the Government's general drive, through this and many other methods, to enhance industrial efficiency and productivity and ensure greater democratic control. It is right, both from the point of view of efficiency and of fair distribution of rewards, that full information should be available to shareholders, employees, creditors, potential investors, financial writers, and the public as a whole. Publicity in all these things is one great safeguard against abuse, and unquestionably other countries, notably the United States, have been ahead of us in this respect, and the United States appears to have done well out of it.
In abolishing the exempt private company we are in one respect going beyond the Jenkins Committee's Report. It recommended that "unquoted" companies other than subsidiaries of quoted ones should be allowed to withhold certain information from their filed accounts. We have not accepted this; we intend that all limited companies should file their full accounts.
The first additional type of information required to be disclosed by this Bill is turnover. Paragraph 15 of Schedule 1 requires turnover to be disclosed in the accounts for the first time under our company laws, and Clause 17 requires that companies carrying on substantially different types of business must show in the directors' report the proportions in


which these are divided, and the profit attributable to each. This also goes beyond the Jenkins Report. The Bill will also require all limited companies to give information about their subsidiaries and associated companies, and the name and country of incorporation of an ultimate holding company.
Next, the Bill will require all limited companies to show in the directors' report the value of goods exported. I believe that a public statement of exports will be an incentive, both to the company itself and often to others, to intensify their exporting efforts, and it will emphasise again the paramount importance which Parliament and the Government attach to the export drive in the long as well as short term.

Mr. John Hall (Wycombe): I apologise for interrupting the right hon. Gentleman just as he is developing his argument, but could he tell the House whether this will apply also to those who contribute very considerably to indirect exports? If not, information given on the accounts can have very little value.

Mr. Jay: I am coming to that point. The hon. Member will find that I shall get on more quickly if he waits for me to reach these points. We have been able today to publish a further export record in our monthly trade returns. We are glad of that, but this should not blind us to the fact that although we have done well, we shall have to do better to get our balance of trade under control.
Some, including the hon. Member—I was coming to him in the next sentence—have argued that this obligation may be unfair to some companies which cannot in the nature of the case export directly, or burdensome to the very small company. Those, however, which cannot export can easily explain this in their directors' report; and to meet the case of very small firms we have excluded—for this purpose only—those whose turnover does not exceed £20,000 a year.
The Bill also lays down rules for far wider disclosure of the emoluments of company chairmen, directors and highly-paid executives than we have ever had before in this country.

Sir G. Nabarro: Before the right hon. Gentleman leaves exports, may I say that I am very much in sympathy about the disclosure of direct export performance—

there is nothing between us there—but he has not stated the problem, which does not relate only to small firms but also affects large companies which manufacture goods which are subsequently incorporated into manufactured equipment which is exported. Those firms cannot ascertain precisely what volume or value of their indirect exports finds its way overseas ultimately.

Mr. Jay: Yes, the Joseph Lucas case is a classical one, but it is open for these companies in their directors' reports to make this perfectly clear and to say exactly what contribution they are making
As I have said, the Bill also lays down rules for far wider disclosure of the emoluments of company chairmen, directors and highly-paid executives than we ever had before in this country. Here again we have lagged woefully behind the United States. If there is to be mutual confidence in industry, if investors are to know what their directors are doing, and if there is to be some reasonable parallel in these matters between publicly and privately owned industry and services, it is surely clear that we must now go much further than the old portmanteau provision for the disclosure of total directors' "emoluments".
What this Bill does is to ensure the separate disclosure of the receipts of the chairman and also, if there is a director paid more highly than the chairman, of that director also. Companies will in addition have to show the number of directors receiving up to £2,500, the number receiving between £2,500 and £5,000 and so on in bands of £2,500.
The number of highly-paid executives—that is employees who are not directors—who are paid more than £10,000 will also have to be shown. This information will also be given in bands rather than for individuals; and will all appear, of course, in the company's filed accounts. We have tried here to strike a balance between the present grossly insufficient disclosure, and going too far in revealing everybody's private individual income to the public gaze, though some people may think there is a case for doing even that.
Some recent events in the company world, however, have shown that disclosure of what are strictly emoluments


alone—salaries, fees, pensions payments, etc.—is not enough to cover all the devices by which sometimes very high rewards have been channelled to some individuals and concealed from shareholders. We have, therefore, provided that information should be kept at the registered offices of the company, and be available for inspection by shareholders, about directors' service contracts and that the register of dealings by directors in their own company's shares, which is already required by the Act of 1948, should contain more detailed information than at present and should be more widely available.
As part of our general aim in this Bill is to meet the shareholder's and the public's right to know what is going on, it also lays down that companies should in future, in the directors' report, give figures of both charitable and political subscriptions made at the expense of the shareholders.

Mr. Anthony Barber (Altrincham and Sale): It would be very helpful if we could clear up one point. I believe I am right in saying that certain amendments have been put forward relating to disclosure of directors' emoluments in the case of non-quoted companies. It would be helpful if at the outset the right hon. Gentleman would say whether he accepts those amendments or intends to take any action in regard to them.

Mr. Jay: No, we do not accept those amendments. If the right hon. Gentleman is particularly interested, my right hon. Friend in his reply to the debate tonight will explain what we propose.
We propose that in future companies should give figures both for charitable and political subscriptions made at the expense of the shareholders. The Bill does nothing, of course, to prevent directors both making donations to anyone they like, and keeping them secret, if they make them out of their own individual incomes. Any company can also under the Bill, provided that it is within its powers, donate the shareholders' money to anyone the directors like, if they let the shareholders know what they are doing. All the Clause does is to prevent them using the shareholders' money for these purposes and at the same time re-

fusing to let the shareholders know that they are doing so. I cannot really believe that anybody in 1967 can seriously object to that.
To avoid companies, however, being burdened with very long lists of trivialities—this also was in response to representations made to us in another place—we are only asking for disclosure where the total of political and charitable subscriptions exceeds £50 in any one year, for the split of this total between politics and charity and for details of political subscriptions exceeding £50 to any one recipient. Details of charitable subscriptions exceeding £50 to any one recipient have also to be disclosed, but in a register open to inspection at the registered office of the company and not in the directors' report.
I must also advise the House that I have decided in the course of the Bill's passage that, in the interests of industrial efficiency and modernisation generally, we ought to add one more item of disclosure to those in the Bill; that is a record of the total manpower employed by the company concerned, and of the total wages and salaries bill. In the National Conference on Productivity held by the Prime Minister last September, the view was strongly expressed from both sides of industry that such disclosure would be a further spur to industrial efficiency; and the C.B.I. supports this.
I therefore intend to move an Amendment in Committee to this effect, but to limit this obligation to companies employing more than 100 persons, so as again to avoid imposing excessive extra paper work on small companies where the information might be of least public value.

Mr. R. Gresham Cooke (Twickenham): Does the right hon. Gentleman intend to move an Amendment to bring out the total of salaries and wages, or separate totals for salaries and wages?

Mr. Jay: The total of the two is our present intention. I am sure that the hon. Member will serve on the Committee and will be able to advise us on this.
When the first version of this Bill was introduced into the House almost exactly a year ago, I also undertook to include in it two further provisions for


disclosure, even at the cost of lengthening the Bill, if there was a general wish for this from all sides of the House: fuller disclosure of directors' dealings in the shares of their own companies, on the one hand, and of the names of large equity shareholders who have up till now been able to shelter behind nominees and remain anonymous under our law, on the other hand. We have included both these reforms also in the present Bill. Directors will not merely have to disclose dealings in their own companies' shares but will be actually prohibited from dealing in options in those shares. Here again we are bringing our law more up to date, and more in line with the standards of the United States and some other countries.
Nominee shareholdings are a more difficult issue. It can be argued, on the one hand, that a man's private savings invested in shares should be just as confidential as his bank account, or his Post Office Savings deposit; or, on the other hand, that if anybody holds any shares, there is no reason why the fact should not be disclosed. I have often heard both these points of view. The Jenkins Committee reached what seemed to me a sensible compromise: that when a shareholding is a trivial proportion of a quoted company's capital, that is a private affair, but that it becomes of public interest when the proportion of shares held in the company is substantial, because then an element of control is involved. We have decided, therefore, difficult though this is to enact—this was one of our reasons for hesitating a year ago—to adopt the Jenkins' proposal that names of the beneficial owners of 10 per cent. or more of a class of equity capital in a quoted company should be disclosed at the registered office of that company.
Our company law at present also gives special exemption from the obligations of disclosure to three types of business: banking, insurance and shipping. Here again, there have always been two schools of thought, one believing that full disclosure might be injurious to our overseas earnings, or indeed to depositors and policy holders, respectively, in the case of banking and insurance, and the other that all these companies should be treated like any other under the law. In the case of banking and discount companies, a majority of

the Jenkins Committee recommended continuance of the present exemptions. What we are doing in this Bill by Clause 12 is to give the Board of Trade power to take away from banking and discount companies the present exemptions in the 1948 Act. Any regulations doing this would have to be approved by each House of Parliament. I am in consultation with my right hon. Friend the Chancellor of the Exchequer, and indeed, the banks about the use of these powers, but it is not, of course, possible to act on them until the Bill becomes law.
In the case of shipping, the Jenkins Committee recommended withdrawal of the exemptions. There are, however, some delicate questions of international business here and our shipping earnings are, in my view, much too vital an element in our balance of payments to take serious risks in this matter. I have, therefore, included in the Bill an amendment to the 1948 Act which will enable the Board of Trade to determine which shipping companies shall be granted these exemptions. The aim will be to publish all reasonable information so far as is consistent with protecting our overseas earnings.
Next, on insurance, there are two major instalments of reform of the law in this Bill. First, it provides for improved powers to make regulations about disclosure in the accounts of insurance companies, which were in any case needed, and, secondly, more drastic remedies for the abuses in motor insurance which have emerged rather luridly in the past year since the first version of the Bill was debated a year ago.
Under existing law, insurance companies have exemption permitting hidden reserves, and undisclosed transfers to and from these reserves, before arriving at published profits, as have the banks. But insurance companies have, under the Insurance Companies Act, 1958, to deposit with the Board of Trade balance sheets, profit and loss accounts and revenue accounts in a prescribed form. Copies of these are available then for public inspection. The Jenkins Committee recommended that the general exemption should remain, but that all insurance companies should in future have to give new information in their annual accounts about the income derived from different kinds of investment. We take powers in the


Bill to carry this out by prescribing the contents of the accounts of insurance companies through Statutory Instruments made under the 1958 Act rather than under the Bill.
Secondly, we are taking rather drastic powers to control the future activities of insurance companies, and this is particularly necessary, I think the House will agree, in the case of motor insurance. These powers, though they do not spring from the Bill's first main theme of disclosure, are clearly justified, in my view, on grounds of urgency. Stronger powers are necessary both to protect policy holders, and also the reputation of the great majority of British insurers who are widely respected throughout the world. The obligation on Parliament to act here seems to me to be particularly strong, because Parliament compels motorists by law to insure against third party personal risks, but it has not given them any clear guidance in return with whom they should insure. It is true that the Motor Insurers' Bureau scheme, which has been agreed between my right hon. Friend the Minister of Transport and the industry, provides compensation for third party risks which are compulsorily insurable if a company fails, and that is something. But although this is valuable, it is not a fully adequate safeguard.
The best advice that I can give to motorists meanwhile in, I hope, the few remaining months before the Bill becomes law is to repeat what I said in answer to a Question on 27th January from my hon. Friend the Member for Oldbury and Halesowen (Mr. Horner)—and I quote—that
anyone who is offered insurance at what appears to be a cheap premium to seek advice from, for instance, such bodies as the British Insurance Association, Lloyd's, the Corporation of Insurance Brokers, the Association of Insurance Brokers or Lloyd's Insurance Brokers' Association."—[OFFICIAL REPORT, 27th January, 1967; Vol. 739, c. 381.]
That is for the immediate future.
For the long-term future, however, present legal powers are, I believe, clearly inadequate. At present, an insurance company is free to start up and conduct its business as it chooses if it first, publishes financial results in a form prescribed by the Board of Trade, second, has a paid-up share capital of £50,000,

and, third, in the case of a company undertaking non-life insurance, has an excess of assets over liability of at least 10 per cent. of its annual premium income—that is, what is known as the solvency margin. But this solvency margin does not apply in the first two years of operation.
The Board of Trade's existing powers under Section 14 of the 1958 Act to investigate a company alleged to be dubious have proved insufficient. We can under this Section ask for explanations, accounts, and so forth if a company appears to us to be insolvent, but we cannot properly act simply on suspicion that there may be trouble falling short of actual insolvency. Moreover, if we do act and a company refuses to give information, we have to go to the courts to get authority to appoint an inspector. We then have to show that we have reasonable grounds for doubting the solvency of the company. To act without reasonable grounds, or, in other words, without grounds sufficient to stand up to the test of legal challenge, would not only be likely to fail and to incur severe criticism from the courts but the result might be to undermine a company which otherwise might have maintained its solvency and so damage the policy holders as well as everyone else. We have, in these circumstances, in a number of cases, by private consultation with companies, enabled them to pull round and so protected the policy-holders without any damaging public rumours.
Details of these cases cannot be revealed because the affairs of the companies in question cannot be disclosed by the Board of Trade. Indeed, everybody would suffer if they were. In other cases we have been warned, from what appeared to be very good sources, that certain companies were insolvent. We have judged it wise not to invoke our powers, and these companies have, in fact, survived and built up a strong position after a period of time. In other cases, again, we have seriously doubted the solvency of companies that have subsequently failed, but we did not have the evidence which my legal advisers judged would have proved adequate in court.
For some time, I have believed this to be a thoroughly unsatisfactory situation. The Bill now proposes to give the Board of Trade the following new powers.


First of all, the Bill lays down that any insurance company starting in business, or starting in a new line of business, after 3rd November, 1966, when the Bill was published, will have to get a licence from the Board of Trade when the Bill receives the Royal Assent if it is to carry on the relevant business after that date. Any company starting up, or starting new business, after the Bill becomes law will, of course, have to get permission from the start of the business. This licensing system will apply to all classes of insurance business covered by the Act of 1958, including motor insurance. It is in a sense retrospective to 3rd November last in that any company going into, for example, motor insurance since that date runs the risk of not getting an authorisation when the Bill becomes law. Therefore, the Bill has already had some effect in protecting the motorist since November. It is not retrospective, however, in that it does not make it unlawful, or render anyone subject to prosecution, for starting a business before the Bill becomes law. In my view, that would be going too far.
These are, admittedly, drastic powers, because they give the Board of Trade at its discretion authority to refuse an application to carry on, for example, motor insurance, without our giving any reasons or right of appeal. I must make perfectly clear that that is what we propose, but I am convinced we have got to be as drastic as this if the public is to be protected and recent abuses stamped out. Experience shows that if it were necessary for the Board of Trade to state its reasons for refusing authority—the grounds might be that we did not regard a certain individual as a fit and proper person to carry on the business—we should be in the dilemma of either authorising a highly dubious company or else having to disclose information given to us in confidence. I would also say in defence of this drastic course that it follows the system introduced by a Conservative Government in the Prevention of Fraud (Investments) Act, 1939, controlling unit trusts. This legislation appears to have worked over many years under various Governments without any serious cause for complaint.

Sir G. Nabarro: What happens to the policy-holders if the right hon. Gentleman refuses to allow a motor insurance busi-

ness to carry on? They have made an investment in accordance with the requirements of the Statute to insure their vehicles for the current year. If the Board of Trade then refuses the company permission to carry on, what is the policyholders' position?

Mr. Jay: I am coming to the existing companies. So far, I have dealt only with either new companies or companies starting in motor insurance for the first time. But I have anticipated the hon. Gentleman's question, and I shall come straight to that.
Not only do we have to prevent the dubious new insurance business from starting up but we need power also to control a company already in existence which might be liable to become insolvent. To meet this problem the Bill empowers the Board of Trade in certain circumstances to direct an existing company to restrict its business by not undertaking any new contracts or renewals in a specified class of insurance. Contracts previously entered into, of course, would stand. This could be done only if the company had failed to fulfil obligations under this Bill or under the 1958 Act, or if the Board of Trade were in doubt about the solvency of the company or about the fitness of the persons associated with it. We have thus tried to cover both new companies and existing ones.
There are a number of other safeguards in this matter of motor insurance. The minimum financial resources initially required by a company are increased by the Bill. Adequate reinsurance arrangements are made a condition of licensing. The Board of Trade has to be satisfied that a company is under the management of persons fit and proper to be associated with it. We are given power to obtain more information about the financial resources of insurers at more frequent intervals. The minimum solvency margin for non-life business is increased, and will apply in the first two years of business, which has not been the case hitherto. The Bill also gives us power in certain circumstances to require a company to realise unsuitable investments, and to hold adequate assets in this country. Finally, it gives the Board of Trade wider and less clumsy powers of investigation, and removes the need to get leave of the court before petitioning for a winding-up order.
I think that the House will agree that all these powers, when taken together, make a formidable array, admittedly drastic but nevertheless, in my view, necessary if we are to protect the public from recklessness and, in some cases, fraud by insurers. From the public's point of view, the sooner these essential safeguards are passed into law the better it will be.

Mr. John Hall: The right hon. Gentleman has considered measures for the control of entry into insurance business by new companies and has had in mind general matters of conduct. Did he consider also how he could control entry into the business by insurance brokers who are in part responsible for some of the troubles which have been experienced?

Mr. Jay: Yes, we have considered that. It would be much more difficult, and I hope that, if there are no longer any dubious insurance companies in business, there will be no dubious insurers to whom brokers could direct the public. However, this is a matter which could be discussed further in Committee. We have, at least, gone this far.
Hon. Members will have guessed already from my excessively long speech that there is a good deal in the Bill. I have not covered it all yet and there is a good deal more—in the Bill, I mean, not in my speech. I shall leave the many other detailed reforms either to my right hon. Friend, if he catches Mr. Speaker's eye later today, or to the Committee stage. Any questions, of course, can be put to my right hon. Friend today.
I should mention that Part III of the Bill amends the Moneylenders Act, because urgent clarification is necessary of the rather mysterious distinction—mysterious to laymen; I know that everything is clear to lawyers—between mere moneylending, on the one hand, and moneylending which is dignified by the name of banking, on the other.
The House will be glad to learn that in one respect we can shorten the Bill. Certain noble Lords in another place inserted a provision which would enable companies to issue shares of no par value. A technical case can, perhaps, be made for that on the ground that the existing system can be misleading, but I

am not sure that no par value shares would be much less misleading. That issue is in no way related to disclosure and is in no way urgent or pressing. Therefore, it has nothing to do with the main theme of the Bill and would be much more suitable, if the case is made out, for inclusion in the later and wider Bill.
Incidentally, we found on investigation that its enactment would also require a number of consequential changes in tax law for which at present there is no prospect of finding time. We therefore propose to omit Clause 35 from the Bill. If we did not, there would be many other reforms, of much higher priority on merits but not related to disclosure, which would have a good or possibly better claim to be included.
I believe that the Bill, no doubt perfected in Committee and at Report stage, will contribute substantially to wider information and understanding about our company affairs, both among experts and non-experts, and therefore to greater efficiency in British industry, more intelligent investment and greater exporting capacity. As I have said, we need further legislation to carry through the further Jenkins proposals and to tackle even more drastically the wider relationship in a modern social democracy between shareholders, employees, directors and the public.
If hon. Members give us their views on those wider issues today—and if that is in order, as I should guess that it was—I shall certainly take account of them in preparing the future legislation. Meanwhile, I am sure that it is best to accomplish now what can be done in this Session, including the immediate protection of the public, particularly the motorist.
For those reasons, I ask the House to give the Bill an unopposed Second Reading today.

4.42 p.m.

Mr. Anthony Barber (Altrincham and Sale): Before I come to certain aspects of the Bill with which we on these benches are in fundamental disagreement, and which we shall oppose in Committee, I should make two points abundantly clear. First, we believe that there should be greater accountability of companies, which inevitably means greater disclosure of information. But in every case where disclosure is demanded it is incumbent


upon those who demand it to establish that it will serve a useful purpose. Secondly, we shall support the right hon. Gentleman the President of the Board of Trade and his colleagues in their efforts to tighten up the law governing insurance. My hon. Friend the Member for Gloucestershire, South (Mr. Corfield) will have more to say, if he catches Mr. Speaker's eye, in winding up for the Opposition tonight.
I have no need to refer to matters which are now sub judice to establish that during the past six months or so a number of instances has come to light, particularly in the field of motor insurance, which has caused widespread concern. It is a remarkable tribute to the British insurance industry that the exposure of a few seamy operations has not tarnished the general reputation of British insurance for integrity and efficiency. But the fact that the general reputation of British insurance remains high owes nothing to Ministers at the Board of Trade.
One of the means whereby the Bill seeks to tackle the problem is to provide that a new insurance company shall have a paid-up share capital of not less than £100,000. Last month the President of the Board of Trade was asked to publish the names of motor insurance companies which did not satisfy that criterion. The Minister of State answered the Written Question in a manner which I can only describe as appalling and as showing complete ignorance of the factors which determine whether or not an insurance company is sound.

The Minister of State, Board of Trade (Mr. George Darling): That was not the Question.

Mr. Barber: The Minister was asked a straightforward Question. He answered it, but it would have been easy for him to take steps to explain the significance of his factual Answer. He chose not to do so. I shall not weary the House with a whole lot of newspaper cuttings, but, as every reputable newspaper indicated at the time, the result was that the motor insurance world was thrown into "unprecedented disarray", as one newspaper put it.
I mention that unhappy incident not to embarrass a Minister for whom we all have a very high regard but because as long ago as 8th July last year my

hon. Friend the Member for Worcester (Mr. Peter Walker) wrote to the President of the Board of Trade about the introduction of a short interim Bill governing the share capital of insurance companies He concluded his letter with these words:
The Opposition would certainly give every assistance in seeing that the Bill was passed speedily through all its stages and I know that the British Insurance Association would welcome such a measure.
That offer was turned down, and instead of the speedy introduction last summer of a new Companies Bill to safeguard the public, priority was given to a Bill to nationalise the steel industry, a Bill of almost exactly the same length as that now before the House.

Mr. Jay: My right hon. Friend was asked a question of fact, and if he or I are asked a question of fact by an hon. Member we are bound to answer it. We do not do it for fun.

Mr. Barber: No, but I have had enough experience of these matters to know that if one is asked a question of fact, in addition to giving a factual answer one can add an explanation or qualification. Alternatively, it is open to a Minister at precisely the same time to take steps with the Press to ensure that the answer is put in its proper context. I repeat that I think that the way this was dealt with by the right hon. Gentleman was appalling, and that was the view taken by every financial writer throughout the country.

Mr. J. Bruce-Gardyne: Does my right hon. Friend recall that on occasions the President of the Board of Trade, in giving factual answers which he has not liked to give, has given detailed explanations to try to put them in a different context?

Mr. Barber: That is perfectly true.
I now turn to Part I of the Bill, which deals in the main with the extent and the nature of disclosure by companies. The right hon. Gentleman said a few minutes ago that the theme of the Bill, apart from the urgent question of insurance, was greater disclosure. I should like to dwell on that for a little while, and I want first to say something about the principles which I believe should underlie any new proposal for greater disclosure in company accounts.
Originally, the main purpose of accounts was merely as an aid to the internal efficiency of an enterprise. Later, as individuals joined together in enterprises, the accounts provided information for the joint owners of the continuing businesses. It was in the middle of the last century, with the general conferment of the privilege of limited liability by the simple act of registration, that there came the pressing need for information to be made available to a company's creditors as well as its owners.
I suppose that it is true to say that one of the purposes—one might say one of the primary purposes—of greater accountability has in the past been the prevention of abuse, and I for one accept that we are no longer concerned merely to safeguard the shareholder and creditor but also to stimulate industrial and commercial efficiency. One of the ways of doing this is to provide sufficient information for discerning investors.
It is just because we in Britain have a sophisticated capital market and because we in the Conservative Party believe in a market economy that we take the view that the provision of adequate information makes a real contribution to industrial efficiency and so to the best use of our available resources. But if the disclosure of information is necessary to safeguard the shareholders and creditors, and if it is an aid to efficiency, it does not follow that there should be disclosure without limit and we believe that, in a number of instances, the requirements for greater disclosure in the Bill and the intentions which the right hon. Gentleman has made known today go too far.
But, lest there should be any misunderstanding, I should make it clear that we take our stand on the criteria laid down by the Jenkins Committee. The right hon. Gentleman said that he paid high regard to the Committee. But I shall show that, in the case of disclosure, the Government do not accept the Jenkins Report. When the previous Companies Bill was before the House in February, 1966—it lapsed with the end of the last Parliament—I quoted a passage from the Jenkins Report which I still believe should govern the nature and extent of company disclosure, and the argu-

ments which I then adduced were never refuted. Throughout the whole of the proceedings on this Bill in another place, no explanation was ever forthcoming as to why the Government rejected the view of the Jenkins Committee and today once again the right hon. Gentleman said, as a result of an intervention by me, that he did not accept the recommendations of the Committee on disclosure affecting 400,000 companies in this country and he gave us no explanation as to why.
Therefore I make no apology for again quoting paragraph 13 of the Jenkins Report, for I believe that it is basic to this whole question. This is what the Report said and it is what I accept:
While … we share the views of the Cohen Committee as to the importance of ensuring that companies should make available to shareholders, creditors and the general public as much information as is reasonably required, we also recognise the importance, where the desirability of some proposed new statutory obligation to provide information is in question, of considering whether the additional information would be of any real value to the persons receiving it, and if so whether its ascertainment would involve an amount of work disproportionate to its value, or its publication might be detrimental to the company's business, and thus indirectly to its shareholders and creditors.
These are the criteria which the Government should have applied to the 400,000 companies which at present have the status of exempt private companies. Within this category is every single one of the small incorporated family businesses. The Government are taking in the Bill powers to compel every single one of these family businesses to make public information which will in no way contribute to efficiency and will in many cases be detrimental to the business. Furthermore, the Government are doing this against the unanimous recommendation of the Jenkins Committee on Company Law, which was set up by the last Government to advise on this very matter.

Mr. Kevin McNamara: There is some concern here for the small family company, which one can appreciate. Would the right hon. Gentleman be willing to take a certain fixed level—say, £15,000 or £10,000 in assets—and say that below that level there would be no need for disclosure?

Mr. Barber: Perhaps I can come to that point in a moment. The point now is that the President of the Board of Trade, without explanation, is taking steps which will seriously affect hundreds of thousands of companies. The attitude of the Government to the family business was epitomised in the attacks already made upon it by close company provisions and the Selective Employment Tax and this further attack does not therefore surprise me. I will be more specific.
It is common ground that, among the 400,000 exempt private companies, there are a number of very large enterprises. It is also common ground that the overwhelming majority are small. I readily grant to the Government that there is a case for some additional disclosure by all these companies, small and large. But, of course, the Government in the Bill have gone beyond what the Jenkins Committee recognised as reasonable, and this is where we take issue with the right hon. Gentleman.
Since hon. Members opposite appear to be in some doubt as to whether my remarks about the attitude of the Government to small businesses are reasonable, I will refer them to what the Lord Chancellor said in another place, for he made quite clear what his own attitude was to this type of business. He said:
I think that most lawyers and accountants would agree that, apart from any other factor, the exempt private company has really been the backbone of all the most successful tax frauds and tax evasions that there are."—[OFFICIAL REPORT, House of Lords, 22nd November, 1966; Vol. 278. c. 130.]
The implication of those words is wholly unwarranted and I am speaking with five years' experience at the tax bar and as a Treasury Minister for a number of years, when I had some responsibility for the Inland Revenue. What the Lord Chancellor said there about these 400,000 companies is simply not true.
If it is necessary, in order to protect those who trade with small family businesses and who extend credit to them, and if it is in the public interest, to compel these companies to file information about their affairs, I have no objection and I make it clear that I am prepared to lend all my support to any public disclosure to the extent that it is necessary for this purpose. But in the case of the small companies—and it is

these with which I am dealing—the Government have gone further and have gone against the advice of the Jenkins Committee.
Jenkins recommended that the distinction between exempt and non-exempt private companies should be abolished. The hon. Member for Kingston upon Hull, North (Mr. McNamara) appears to take the same view as a great many of my hon. Friends—that it is going too far to abolish altogether the status of exempt private companies, and that there is perhaps a case for keeping that status in respect of companies with net assets of less than a specified amount. I want to be perfectly fair. I believe that there is great attraction and merit in this proposal, but, having looked into it, I am doubtful as to whether it is a practical proposition. I hope, as there is considerable force from many reputable quarters behind this suggestion, that there will be an opportunity in Committee of going into this very fully, because if it should be the case that this provides a practical solution, then it would probably be the answer to most of the criticisms which I am levelling against the Government.

Mr. John Hall: Would it not be a possible solution that companies below a certain level and size should apply to the Board of Trade for exemption and the Board of Trade would have the power to make a decision?

Mr. Barber: This is another way of approaching the matter, based on the same principle which I was putting forward. That certainly ought to be looked into. But let us assume for the moment that the hon. Gentleman the Member for Kingston upon Hull, North and others on this side of the House do not get their way, then even so I can see no reason at all why the Government should not accept the recommendations of the Jenkins Committee, that certain matters which have to be disclosed by a public company should not be disclosed in the case of a company whose securities have been neither quoted nor offered to the public.
This was the advice of the Jenkins Committee, and it has been turned down. We have never had, last February, during the whole of the proceedings in another place or today, any explanation as to why the right hon. Gentleman will not accept this.

Mr. Jay: The right hon. Gentleman says that I have put forward no explanation. I have given the explanation that in our view limited liability is a privilege. We feel that with the privilege there should be obligations of disclosure. The right hon. Gentleman may not agree with us, but that is our explanation.

Mr. Barber: I do not think that it is a very convincing argument merely to say that one is giving a person privileges and that they therefore have obligations. What we want to know is what is the purpose of imposing the obligations? What good will it do to provide the information which the Jenkins Committee said should not be provided by these small companies? On this the Jenkins Committee was precise and specific and I cannot improve on its language. At paragraph 352 it says:
We recommend that companies whose securities have been neither quoted nor offered to the public and which are not subsidiaries of companies whose securities have been quoted or offered to the public should be permitted to withhold from accounts filed with the Registrar of Companies … the information … about the directors' emoluments … the details of turnover …
and other matters there mentioned. It is the case that neither Parliament nor the country has ever been given the reasons why the right hon. Gentleman thinks that it will help to improve the efficiency of industry if these 300,000 companies concerned have to provide this information.

Mr. John M. Temple: Would not my right hon. Friend accept that there is another argument in support of his case and that is that already the accountancy profession is over-burdened with work and this will put an additional strain upon it and upon the Registrar of Companies which is quite unjustifiable?

Mr. Barber: This is true, and it is a practical consideration, which I believe was mentioned in another place. I would prefer, because of the time available, to limit myself to the issue of principle. I ask the House to consider, for example, the reasoning behind the recommendation of the Jenkins Committee over the disclosure of turnover. I repeat that I have no objection at all to the disclosure of turnover by a public company, a quoted company. I am concerned here with something approaching 300,000 small companies, including all of the

small family businesses in the country. It is right that these companies should know what the Labour Government intend to compel them to do.
Let me give an example. The small incorporated family business, with one shop in, say, Manchester, will in future have to publish its turnover to the world. Anyone will be able to get hold of that information if this Bill goes through, but the small company's principal competitor, with a chain of shops throughout the country, including one in the same street in Manchester, will not be obliged to publish any information at all about its turnover in Manchester.
The result will be that once again the Government will be deliberately loading the dice against the small business. What I have said is factually correct and cannot be denied. This is a grossly unfair provision. In the first place, it will lead to unfair competition because the chain store company will have all the information that it wants if it wishes to put the small, single shop company out of business, while the single shop company will have no comparable information about its larger competitor.
Secondly, this disparity of information disclosed by the small and large company will be nectar to the take-over bidder who will be in a position to make a bid, not as the result of equality of treatment, but of disclosure, favourable only to the larger store.

Mr. Joel Barnett: The right hon. Gentleman talks about the advantage to a take-over bidder. He is surely talking about small private close companies which presumably would be wholly-owned by the shareholders and directors? How would it help if someone else has the information? They are still perfectly entitled to refuse to sell.

Mr. Barber: Of course they are entitled to refuse to sell. But Tartan Arrow had no need to sell until pressure was brought upon it, and it had to sell. [HON. MEMBERS: "Answer."] I will
answer. The point that I am making is that the small company will have to provide information such as the details of its turnover in respect of a specific enterprise, while the large company, in direct competition, will not have to give that information. That is grossly unfair, and


that is why we shall oppose it in Committee. I have used the illustration of a shop, but the same principle applies throughout the whole of industry and commerce.
Then there is the proposal, which the right hon. Gentleman confirmed today, that every small incorporated family business should be obliged to publish to the world details of the directors' emoluments. Again this proposal is against the advice of the Jenkins Committee and we have been given no indication of what good, in the eyes of the Government, this disclosure will do. Let me make two matters clear.
I have no objection whatever to the publication of directors' emoluments in the case of public companies. Indeed, disclosure in their case will, I am sure, inevitably push up the salaries of some of our senior executives and, incidentally, will finally ensure that the Government are forced to pay the rate for the job to the members of the National Steel Corporation, which will be a very good thing. The second matter which I want to make clear is this. Of course the directors' emoluments in even the smallest incorporated company must be made known to the shareholders of that company. No one would complain about that, but what we object to is that the salaries of the man and his wife, running a grocers shop somewhere as a limited liability company, should be made public to every inquisitive busybody in the town.
I would accept this if I could see some useful purpose in it. Here again we take our stand on the Jenkins Report. In paragraph 351 it says:
We recognised, … that some information required in the accounts, while of interest to the members, was not of prime importance to creditors, and that its public disclosure by some small companies might be embarrassing to them; we had in mind particularly the requirement to disclose directors' emoluments, To meet this, in our opinion well-founded objection to general disclosure we would give a limited exemption to companies whose securities had been neither quoted nor offered to the public and which are not subsidiaries of companies whose securities have been quoted or offered to the public. While requiring such companies to circulate full accounts to their members and their debenture holders, we would permit them to exclude from accounts filed with the Registrar of Companies:

(1) the information about directors' emoluments.
I hope that the Minister of State, when he replies, will deal specifically with the recommendations of the Jenkins Committee, to which I have referred. That reasoning which I have quoted seems to be beyond reproach. This affects the directors of 300,000 companies, and, it includes every single small incorporated company throughout the length and breadth of our land. This is a matter of importance, and we are entitled to have an explanation as to why these specific recommendations have been thrown overboard. We stand by that recommendation and we shall do everything in our power in Committee to see that it is reflected in the Bill.
There are two other matters of disclosure to which I want briefly to refer. The provision compelling companies to publish the value of goods exported by them will, I believe, prove to be both misleading and dangerous—[An HON. MEMBER: "And abortive."] And, as my hon. Friend said, abortive. It will be totally misleading in the case of those companies which do not export directly, but, as my hon. Friend pointed out, supply components to other companies who then export the finished product.
It will, I believe, be positively dangerous in some cases, because the information to be published will—I agree that this applies only to a limited number of cases—provide our overseas competitors with just the information they want in order to give them the edge over the British manufacturer of similar products.

Sir G. Nabarro: Would my hon. Friend not agree that we are all interested to see exports promoted but with the objective of improving permanently our balance of payments; but why, in this context, are exports more important than imports? Is it not essential that companies should minimise their imports and maximise their exports if we are to get the greatest, the best, the optimum, balance in our trade arrangements in the future? If we disclose exports, why not disclose imports?

Mr. Barber: I have no doubt that an Amendment—perhaps a probing Amendment—to that effect will be put down in Committee, but I doubt whether my hon. Friend will ever get a satisfactory


answer. If the Board of Trade wants this information, by all means let it be supplied to the Government, but on a confidential basis?
On 21st February, last year, I elaborated our objections to this proposal, and I do not intend to repeat them today. We shall certainly return to this provision in Committee.
In answer to the point which the right hon. Gentleman made about this proposal when he moved the Second Reading, if he really thinks that the publication of these export figures by various companies will really be an incentive to companies to increase their exports, then he has not the remotest idea of what makes industry tick. That is why my hon. Friend is perfectly correct in pointing out that not only is this proposal misleading and dangerous, but it is also abortive.

Mr. Temple: Perhaps the President of the Board of Trade requires this information in order to help his right hon. Friend the Prime Minister to prepare a future Honours List.

Mr. Barber: That is always a possibility. Finally, regarding disclosure, I want to comment on the requirement to disclose charitable and political contributions.
When the Second Reading of the previous Company's Bill was debated last year, the significance to the Government of this proposal, which was then limited to political contributions, was apparent from the extraordinary fact that the Minister of State, in opening the debate, spent almost half his speech in dealing with this particular Clause. I can dismiss it with a couple of sentences. The new provision for the disclosure of charitable contributions and the provision for the disclosure of political contributions are both mean and irrelevant—[Laughter.]—and they will make no contribution—I hope hon. Members will laugh at this—to an increase in industrial production which, under the Labour Government, has now fallen back to the same level as October, 1964. Those are the latest figures.
That is the only comment I make on these provisions. I have no doubt there will be many Amendments moved in Committee to deal with the position of

charities which may well be affected by these Clauses.
I turn now to one important change made in the Bill in another place, namely, the inclusion of provisions permitting the introduction of no par value shares. I was bitterly disappointed when this afternoon the right hon. Gentlemen rose and said that he would take out of the Bill these provisions which are universally desired throughout industry, finance and commerce. Indeed, every argument of logic and common sense must lead anyone to the conclusion that shares of no par value should be permitted.
We should be indebted to my noble Friend, Lord Eccles, for his persistence and ingenuity in another place in moving this Amendment. The introduction of shares of no par value would certainly add to the clarity and accuracy of company accounts and would avoid the present nonsense of declaring dividends as a percentage of nominal value which bears no relation to reality.
There is everything to be said for the introduction of shares of no par value, and, indeed, the Minister of State in another place said that he personally—and, after all, he has had some experience of business—found the proposal acceptable. The President of the Board of Trade's attitude really is incredible since, as the Bill comes to us from another place, these provisions are incorporated in it. If the right hon. Gentleman cannot get his advisers, and, in particular, his Parliamentary draftsmen, to knock them into proper legal shape and to include these provisions in the Bill—provisions which I believe would be almost universally accepted—then I can assure him that when he moves his Amendment in Committee to delete these provisions, it will be bitterly resisted by my hon. Friends.
The Bill, when it started in another place, was a better Bill than that which was introduced in February last year and which lapsed with the General Election. It is all the better for the scrutiny and the Amendments which have been made in another place. I hope the House will join with me in paying a tribute to the work of another place in making our task in this House all the easier.
When this matter was last debated in the House a year ago, there were complaints that various matters had not been


covered, such as directors share dealings, the position which arises where directors have an interest in contracts entered into by their company, and so on. Many of these matters are now covered and they will require careful consideration in Committee. There are, of course, still many omissions, and it would take me a long time to detail them.
We are told that we are to have a second Companies Bill during the lifetime of this Parliament. We shall believe that when we see it. However, we have already been given a hint of what is in the Government's mind. The right hon. Gentleman this afternoon issued an open invitation to both sides of the House to suggest what might be included in the second Companies Bill. It was quite significant that during the Second Reading in another place the Lord Chancellor said
The Government will hope to be able to deal in the other Bill with the question of the protection of minorities …. as the success or failure of a company naturally depends so much on those who work for the company, the employees—of whether they ought not to have a more settled place or places on the board of directors of the company by which they are employed than English law allows them now"—[OFFICIAL REPORT, House of Lords, 22nd November, 1966; Vol. 278, c. 136.]
But, of course, there is nothing whatever in the law at present—and I am dealing with the law at the moment—to prevent an employee from being elected to the board of directors. I am now coming to the point of substance [An HON. MEMBER: "The Lord Chancellor is a lawyer."] The Lord Chancellor is supposed to be a lawyer. There is nothing in the law to prevent this at the moment. I put it to the right hon. Gentleman and his colleagues that if the Government are thinking of making it a legal reqirement that representatives of trade unions should sit on the board of directors, I would, since the right hon. Gentleman has invited us to give our views, quote the words of a very respected trade unionist, Mr. Leslie Cannon, the General President of the Electrical Trades Union. It is useful to get this on the record so that before the next Bill comes along this aspect can also be considered. It clearly runs counter to what hon. Members opposite seem to want and what, apparently, the Lord Chancellor had in mind. Mr. Cannon said:

They"—
that is, the unions—
certainly want to be involved in discussions to increase the efficiency of the enterprise in which, after all, they have to earn a living and to feel part of the complete scheme of things. A line must be drawn at their participation in management. It is my view that little can be gained by such participation. If trade union representatives are in control of an undertaking they will require, quite properly, to take into consideration the views of other interests in the process of decision making. They will, in other words, be acting as managers and no longer as trade unionists. If, however, they are in a minority they will have no control over decision making and there is a danger that due to their participation in decision making they might be inhibited in the use of their countervailing force as trade unionists. The likelihood is that they would receive the odium of being obstructionists from their management colleagues and the odium of being collaborators from their trade union colleagues.
I thought it right to quote these words to the House in the light of the hint given by the Lord Chancellor which may reflect the thinking of right hon. and hon. Members opposite. No one should lightly disregard the view expressed by Mr. Cannon.
I have deliberately concentrated on those issues on which there have been, or still are, differences of opinion between the Government and the Opposition, but taking the Bill as a whole we in the Opposition welcome it and we shall do our best in a constructive manner to improve it in Committee.

5.22 p.m.

Mr. Ben Ford: I wish to draw attention to Clause 13. It has not been mentioned by either Front Bench speaker. It was mentioned very airily in passing by the Lord Chancellor in another place during the Second Reading debate. It is quite important to a large number of people who are in business on their own account. It deals with the qualifications of auditors.
The Explanatory Memorandum states:
Clause 13 allows the Board of Trade to authorise a person, who was on 3rd November, 1966, auditor of an exempt private company and had for the previous twelve months been in practice as an accountant on his own account, to be auditor of companies of the class mentioned in subsection (1). The Clause also permits a person, who is auditor of an exempt private company but who as a consequence of the abolition of that status would not otherwise be qualified, to continue as auditor of the company for a limited period.
This refers to the transitional arrangements mentioned in the Jenkins Report.


The nub of the matter is this. The Board of Trade will no longer be able to authorise a person to be auditor of a company simply because he practised as an accountant before 6th August, 1947.
In pursuing this Clause, the Government are in danger of throwing out the baby with the bath water. I think that we would all agree that it is not desirable for auditors to be members of or associated with companies for which they are carrying out the auditing, but there are a number of associations of auditors which hold examinations which, in some cases, they maintain are comparable with the examinations held by the chartered institutes which are not recognised by the Board of Trade under Section 161(1) of the Companies Act, 1948.
Putting my case in a nutshell, to put this provision in the Bill is the back-door way of trying to squeeze out the small man. We heard something about the small man during a recent debate on a Private Member's Motion. The President of the Board of Trade is advised by his Department and his Department is advised on accountancy matters by a committee upon which are representatives of the chartered institutions and nobody else. Therefore, one perhaps could be forgiven for assuming that the advice of that committee would tend to be slightly biassed.
I suggest to the President of the Board of Trade that he might reconsider his attitude to certain of the non-recognised bodies under Section 161(1) of the Companies Act, 1948, or he might consider including, under the present qualifications in the Bill, the possibility of recognising accountants who are members of bodies which were in being prior to 1935. Such bodies, at least one of which I have knowledge, have been holding their own internal examinations for many years. At present non-qualified people are not admitted, and this was possibly the case post-war.
I urge the President of the Board of Trade to give thought to these matters. Perhaps we shall have the opportunity to discuss them with him. I am making only a short intervention, but if necessary I would be tempted to debate the matter at length.

Mr. John Hall: Would the hon. Gentleman agree that members of highly

reputable bodies such as the Chartered Institute of Secretaries are also caught by Clause 13?

Mr. Ford: I would agree. I hope that in Committee we shall have an opportunity to discuss these matters at length and to put some of these little injustices to rights.

5.28 p.m.

Sir John Vaughan-Morgan: The hon. Member for Bradford, North (Mr. Ford) will forgive me if I do not follow his argument in detail. He made a very cogent speech which was commendably short. I think that the whole House would agree with him. If he is condemned to servitude on the Committee, we shall probably be so won over by his eloquence that we shall join him, if necessary, in voting against the Government.
The President of the Board of Trade introduced the Bill with a very happy speech—a happier occasion than last year's when he was ill. We could almost certainly have begun the proceedings today by singing "Happy Birthday" to the Bill so much improved on last year's version. The prime object of the previous Bill was to introduce the Clause about political contributions. This year's Bill has been made more respectable by the addition of the cloak of charity. It is typical of the priorities of the party opposite: politics first and charity second.
There are some other rather odd omissions from the Bill and I deeply regret that the President of the Board of Trade has not found it possible to include some of them. One rather craven omission is the tackling of the whole problem of non-voting shares. This is a matter on which the Jenkins Committee deliberated and on which there has subsequently been very much talk and such action in certain quarters. Today, we might at least have had some views from the President about his line of thought in this matter.
There are other matters, which I should have thought could be included without great difficulty, in which company legislation lags behind the demands of the Stock Exchange Council. I do not want to elaborate too much because I know that many hon. Members wish to speak. I deeply regret, however, that


the right hon. Gentleman has told us that he will move to delete the Clause about the no-par-value shares. One of the cheering things about the debate in another place and about our debate last year was that some hon. Members opposite were beginning to see this as a reasonable and sensible proposal, and only an old-fashioned socialist prejudice inhibits them now.
The other matter which I regret the President did not deal with and which many people must have in mind is the machinery for the policing of companies. We all know that the Board of Trade is always about three scandals behind and it is the recent spate of insurance scandals that has hastened the Bill. We know that the Companies Department is understaffed and overworked and that legislation is cumbersome and always trying to catch up. In view of all that has been said, however, we might have had more from the President about this.
The Board of Trade—this is not a party matter; it is true—is always locking the door not only after the horse has escaped, but in some cases after it has died from exposure in the public Press. I hoped that the President might indicate to us that he was beginning to consider whether the time was not coming when we should not see whether the American model of the Securities and Exchange Commission might not be more suited to our need, than the Board of Trade. I am not arguing the case one way or the other—I do not know enough about it—but I have been impressed by the more positive and speedy action that the S.E.C. in America can take, and I am disappointed that the President had nothing to say today.
The Board of Trade has most of the powers of the S.E.C. except, I understand, the right to subpoena, but it operates under ministerial aegis and is responsible to Parliament, as, in a sense, the S.E.C. is responsible in the long run to Congress. I think, however, that the fact of ministerial responsibility inhibits some of the actions that might have been taken in some cases.
As both Front-Bench speakers have pointed out, the main purpose of the Bill is greater disclosure, and rightly so. We live in an age when frankness is all, and we are enthusiasts for the disclosure of other people's affairs. There is no doubt that in the case of quoted com-

panies, shareholders and the institutions which are now the largest shareholders are supine and not nearly active enough in keeping the boards of directors up to the mark. We all owe a great debt to the financial Press, which does some of the work which shareholders might do for themselves.
I certainly favour greater disclosure for quoted companies, and also for unquoted companies where there is no reason for exemption if they are large and established. I must, however, add my plea to that of my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) that there should be an exception for the small and budding business when disclosure might give a competitor, foreign or home-grown, unfair and unreciprocated advantages. Of course, the public interest demands in the main greater disclosure, but it must be seen to be in the public interest and proved not to damage irreparably other partial interests.
The President of the Board of Trade rehearsed his arguments twice over. He told us—this was his only argument—that limited liability is a privilege, and that is perfectly true. What he did not say was whether, over the enormous field of 300,000 or 400,000 companies, that privilege had in the main been abused. The right hon. Gentleman is seeking to withdraw a privilege which has not been abused by the vast majority of companies for an undisclosed reason, a privilege which cannot in any way damage the public interest. The onus is still on the right hon. Gentleman to show a better reason than that for altering this law.
It is no answer to say that these companies can be unlimited or partnerships. We all know of the many cases where there are sleeping partners who merit the protection of limited liability and where the company cannot operate as a partnership. If these pleas fall on deaf ears, I refer the President to the remarks made in the debate a year ago by the hon. Member for Stepney (Mr. Shore), who has now disappeared into the limbo of the Government and has become Joint Under-Secretary of State of the Department of Economic Affairs. The hon. Member gave what I regarded as an excellent argument. He said:
no one should imagine that this will not be an immense clerical job.


The hon. Member added later that
someone has to register and collate all this information."—[OFFICIAL REPORT, 21st February, 1966; Vol. 725, c. 63.]
If this task will require a bigger and better bureaucracy, there must surely be far more worthwhile tasks in this field that it could carry out.
I was delighted to hear the hon. Member for Kingston upon Hull, North (Mr. McNamara) suggest that exemption should be given on a certain basis. For my part, this would meet most of the difficulties. We all have different ideas, and I am not impressed at this stage by the argument that it is administratively impossible. It should be perfectly possible to fix a limit when the net tangible assets were below a certain sum or the annual turnover was below a certain figure. Such companies should have exemption, not from filing their accounts, but from disclosure of turnover and directors' emoluments.
If it is impossible to have that exemption, I suggest that the Board of Trade should operate a separate register and that the President could authorise companies on application to be included in that register rather than in the public register. There must be many ways in which it could be done and it cannot be entirely beyond the imagination of the Board of Trade to find a solution to this problem. Otherwise we shall finally kill off some valuable family businesses and stifle great corporations in embryo at a stage when they are "viable but not quotable". Apart from that, I am all in favour of disclosure.
I find it rather oddly squeamish that the President of the Board of Trade is still not as far advanced as the Americans and that salaries are to be quoted in "bands". If we get as far as that, I see no reason why names should not be given. Anybody will be able to work them out by comparing one year's annual report with another.
The proposals concerning export figures, however, are the most ridiculous of the lot. For what purpose are they to be disclosed? To help the creditors? Will the President of the Board of Trade or the Exports Councils spend time going through the files of companies to see whom they should chase to export more? Is it to help foreign competitors? It

would be most useful to my own company to know of our foreign competitors' experience. If companies wish to boast of their exports, they can do so. Nothing sounds better than for the chairman or managing director to say how many countries he has visited in the company's interest, but he is wise not to be too specfic when it comes to details.
This stems from the curious theory of the present Government that exports are always good and imports are bad. But there should be provision for the exemption from such disclosure of some firms and groups of firms, particularly those in the capital goods business, where these details can be extremely damaging.
I find all this slightly odd. As the President of the Board of Trade and I both know, in his constituency there is a large factory making carbon brushes, and about 45 to 50 per cent. of its production is exported. I am never certain why it is virtuous to ship carbon brushes abroad to be included in Volvos or Volkswagens which are brought back to this country, but wrong to send them to Coventry to be included in motor cars which are then sent to the American market. The whole idea is completely "cracked" and based on a curious sense of values.
And now, we are promised yet another Companies Bill in the lifetime of this Parliament. The right hon. Gentleman says that such a Bill will deal with the whole philosophy of the Company. I dread such a Bill. Its philosophy will be false, its politics worse and, judging from recent trends in taxation, its economics will be disastrous.
There is only one fundamental philosophy needed for companies, and it is high time that someone said it and that it was realised. It is to earn the highest return on its assets. That, incidentally produces in the long run the best employers and is best for the consumer. However, I fear that we shall have woolly phraseology woven into the text of the Bill about "social accountability", which somehow is never applied to the large nationalised corporations but only to private businesses. It is monopoly, not profit, which is the ugly word; and it is still monopoly, whether it is public or private.
I dread such a Bill, drafted by men who do not believe in private enterprise and who deride profit-making.

5.42 p.m.

Mr. Brian Parkyn: This Bill does not fill our bellies with fire, it will not change the basic structure of our industrial society. It is not revolutionary. It is hardly controversial, and I am surprised at some of the arguments which have been advanced by hon. Members opposite. Even Clause 18, relating to the declaration of donations for political and charitable purposes, only brings companies into line with trades unions and co-operative societies.
It is true that the Bill contains many necessary reforms of the 1948 Companies Act, but it follows fairly broadly the recommendations of the Jenkins Committee on Company Law, and might have been brought to the House by right hon. and hon. Gentlemen opposite at any time after May, 1962, when its Report was published.
Following on the remarks made by the hon. Member for Reigate (Sir J. Vaughan-Morgan), there is a great deal of substance in the problem of the declaration of information concerning exports. That is the only part of the Bill where there are practical difficulties, where there could be real dangers for certain firms, where it might be necessary to have certain provisions for contracting out of the obligation since it could provide a good deal of useful information in certain countries and where, inevitably, one has the problem of firms which do not export goods but know-how under licence agreements which most firms would regard as a form of invisible exports. There are tremendous problems, and it is a matter which merits careful consideration.
To get back to the Bill, it is a timorous reform, and I hope that soon, as the President of the Board of Trade has indicated, we may have a Companies Bill which will transform the relationship between the four essential elements which go together to make an industrial enterprise. Those are the shareholders or owners, the customers of the enterprise, the community at large and, of course, the employees.
This Bill and much of the earlier legislation dealing with companies has been concerned with the obligation of a company to its owners or shareholders. In a society where we have still largely a market structure, the obligations of a

company to its customers are discharged by supplying the right product or service at the right price. Provided that a free market is maintained by adequate monopoly legislation, a company will not sell its products for long if the price and quality are not right. In other words, it is self-regulating.
The obligations of a company to the community at large, which is the third main element which goes to make up an industrial enterprise, are covered by the various Factories Acts, by the alkali legislation, and by those provisions in this Bill such as Clauses 17 and 19 which require more detailed information to be provided on turnover, types of business, and so forth.
I come, then, to the obligations of a company to its employees. I am not just referring to conditions of work, rates of pay, or bonus schemes, but to the real obligations of a company to its employees.
No company can make profit without owners, without customers and without workers. I have been associated for many years with a chemical company, Scott Bader and Company Ltd., which owns itself entirely. However, because of the present company law, we cannot directly own ourselves, and so we have a holding company, Scott Bader Commonwealth, which owns the share capital of the trading company. Each employee is an equal member of the holding company and, in that way, he helps control the trading company and the directors of the trading company. My hon. Friend the Member for Bilston (Mr. Robert Edwards) is also associated with the enterprise, being a trustee of Scott Bader Commonwealth Limited.
The information which the directors report to their owners—the employees—is considerably more comprehensive than that required by the Bill. The directors are subject to a good deal of questioning and examination by the owners, and, because the owners are also employees, the questioning is always well-informed and often, though not always, constructive.
It is not a large industrial enterprise, but, with a turnover running into several million £s, it is large enough now to indicate that direct worker participation in management and ownership works.
I should like to add a point here. It is that one should not believe that one will have success and bring workers and management together merely by electing directors to a board. Experience in Germany has shown that that kind of thing does not work. The right hon. Member for Altrincham and Sale (Mr. Barber) made that point very strongly during his speech, and I support what he said.
I am coming to the view increasingly that there is a great deal to be said for having a non-executive board of directors. In the old days, when one had non-executive directors, who probably wore their top hats and did not really know what the company was doing, they did not confuse their jobs as directors with those of managers and executives in the company.
A great deal of trouble is caused nowadays by people who are directors and also managers confusing the two responsibilities, and I believe that there must be much more worker participation in organisations. I believe in the common ownership of the means of production, distribution, and exchange, and we must work towards this end. I do not believe that we shall achieve what we want by assuming that by taking directors from trade unionists we will overcome this problem.
One naturally looks at the Bill to see whether it is pointing in the direction of the common ownership of the means of production, distribution and exchange, or at least whether it is vaguely pointing in that direction. I think that it is pointing in the right direction, just. It is a good Bill, with the exception perhaps of the question of exports which I mentioned earlier. It is good as far as it goes, but, like the little girl licking her third ice cream, it does not go far enough. Why should not the full accounts and balance sheet and detailed, unabridged, unbowdlerised directors' report now required by Part I be available to each employee, in addition to the shareholders, the Board of Trade, and the Inland Revenue? I am all for exposing as much as possible of company affairs to break down the embarrassing feelings which exist between both sides of industry. They probably arise because

both sides of industry become suspicious due to a lack of knowledge.
My argument for doing this is not based on political theology—I am not a fundamentalist in any sense of the word—but, on the changing nature of industrial enterprises since the limited liability company was invented about 100 years ago. There have been two principal changes in this time. First, and this has already been touched on by an earlier speaker, the enormously wealthy private investor, often willing to take considerable personal risks with his capital, has been largely replaced by insurance companies, unit trusts, and other forms of institutionalised capital investors—in general unprepared to take commercial risks on the scale of the mid-nineteenth century capitalist.
Secondly, the investment in an industrial enterprise nowadays by employees of their skill and experience, both in management and on the shop floor, is a far greater factor in the success of the company than it was 100 years ago. For these reasons I believe that the Bill should make it mandatory for all employees to be given annually a full copy of the balance sheet and directors' report of the company of which they are a part, just as much a part as the shareholders of the company.

Mr. John Hall: We are very interested in what the hon. Gentleman is saying, and I think that some of his ideas would command support on this side of the House, but, with regard to his proposal that it should be made mandatory to issue a copy of the full balance sheet and directors' report to every employee, would not he agree that it would be necessary to explain it very fully, perhaps even by running a course on how to read and understand balance sheets, otherwise many people would arrive at the wrong conclusion?

Mr. Parkyn: That is an important point. There is no doubt that amongst many workers there are people who know how to read balance sheets, but we have found in our company that an explanation of certain aspects of the balance sheet is necessary, and this needs to be a two-way discussion so that questions can be asked and answered, perhaps by the company secretary or someone like that.


During the Second Reading of the Bill in another place last November the Lord Chancellor said that it was the intention of the Government to introduce a further Companies Bill in the lifetime of this Parliament. I was delighted to hear what my right hon. Friend the President of the Board of Trade said a short time ago, which indicated that perhaps even during this Second Reading debate we might consider a little further where this is all going. This is good news and I hope that when the Government consider this further legislation—and it is highly overdue—they will realise that the Jenkins Committee was far too restricted in its terms of reference really to run over the whole gamut of the relationship between workers, directors, shareholders, customers, suppliers, and the community at large. I hope that the Government will frame their new legislation around the Socialist principle of worker participation in management and common ownership.

5.56 p.m.

Mr. Anthony Grant: In his enthusiasm I thought that I was going to follow the hon. Member for Heywood and Royton (Mr. Barnett). I was prepared to say, "It was always a pleasure to follow the hon. Gentleman", because he is about the only Member on the Government side who knows anything about the subject of company law, but since I have listened to the interesting speech of the hon. Member for Bedford (Mr. Brian Parkyn) I am pleased to say that this is a red, or blue, letter day, for there is yet one more Member on the benches opposite who knows something about this subject and takes an interest in it.
We listened to the hon. Gentleman's speech with great interest. It is obvious that he is enthusiastic about the arguments he advanced, and I share his views about encouraging share ownership. I was interested in the experience in his company. My only reservation is that perhaps it is better to encourage employees to spread their investments, rather than put all their eggs in one basket.
I was glad that the hon. Gentleman reiterated the point made by my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) on the question of directors of boards being compulsorily made up in part by trade unionists or

employees. I think that if one goes into the realm of future philosophy, as the President of the Board of Trade invited us to do, this may be very tempting, particularly to hon. Gentlemen opposite, but I think that it can be scotched by quoting the remarks made at a recent conference, which follow the line of thinking of the hon. Gentleman and of my right hon. Friend.
Referring to the participation of workers as directors on the boards of companies, the speaker said:
It is not possible to believe that any worker director in a company … would be content with anything less than the maximum wages obtainable from that particular company, without any sort of regard to the general wage levels available for those skills in other comparable companies.
Precisely the same considerations would apply if there were consumer directors compulsory on the boards of companies. They would be concerned solely with the question of price, and between these two the directors would fail in the duty which they have to maximise the profits of a company. The person who said those wise words was none other than the hon. Member for Manchester, Cheetham (Mr. Harold Lever), who now adorns the Treasury Bench as a Minister, and I commend them to anybody who is minded to follow this line.
The limited liability system is, of course, the basis of a free capitalist economy, and that it should work efficiently and honestly is vital to the economic health of the nation. It is wrong to regard it, as some do, as an occult, faintly dishonourable, device manipulated for the benefit of sharp financiers in the City of London, because everyone in the country—be they company directors, shareholders, workers or consumers—is affected by company law and this Bill, and it is in this context that we should judge the Bill.
The purpose of company law should be to provide a framework and wide boundaries within which individuals and entrepreneurs can combine to develop their skill and energy freely. It should also encourage the spread of ownership and investment throughout the community. A wide disclosure of company activities is obviously necessary if an increasing number of the public are to be persuaded to invest surplus earnings and


savings in capital, and, in so far as the Bill deals with greater disclosure of company affairs I welcome it. In so far as it fails miserably to deal with many outstanding and overdue reforms necessary to make company law relevant to the 20th century, many of them recommended by Jenkins more than five years ago, I regret it. To the extent that the Government are using the Bill as a sort of packhorse on which to load a pretty mean piece of party political spite, I utterly condemn it.
But, like the curate's egg, the Bill is undoubtedly good in parts. I support the provisions concerning insurance companies. These are welcomed by Lloyds and the City of London generally. The standards set down in the Bill are already freely provided by all reputable insurance companies. It is right that these provisions should be in the Bill, because it is State compulsion which places people under an obligation to engage in insurance. I also welcome the provisions of Clause 91, concerning the repeal of the Money-lenders Act. A new definition of moneylenders is long overdue. Many reputable finance companies and hire-purchase companies have found this to be inhibiting recently.
There is one point about which I am anxious, and which I hope one of the Ministers will consider. As the law stands, it is possible for a debtor who has borrowed money from a reputable finance house or hire-purchase company, in a normal transaction, to avoid repayment by pleading the Money-lenders Act. This has been happening recently. If the Bill becomes law the provisions of Clause 90 lay down that the Board of Trade can, from such date as it may specify, exclude a company which it is satisfied is a bona fide finance company from the rigours of the Money-lenders Act.
If litigation is pending before the Bill becomes law, will the provisions be backdated so as to avoid serious damage, running into millions of pounds, being done to this section of the market, through defaulting debtors avoiding their obligations by pleading the Money-lenders Act? I hope that the Minister will consider that point, if not now, at any rate in winding up, and certainly in Committee. I hope that he will also consider the point raised in another place concerning marine mortgage companies.
I also welcome the provision extending the limitation on partnerships, which is wholly in line with the recommendations of the Jenkins Committee. It is quite absurd to put an artificial limitation on partnerships. I hope that the little chink in the door provided by Clause 41(2), which enables the Board of Trade to allow other bodies through, by Statutory Instrument or Regulations, will enable that splendid institution, the Investment Club movement whose aims I always seek to advance, to get through the door and become lawful without having to form a limited company.
The Bill contains many sins of commission and omission. The sins of commission have been dealt with already. The need to disclose particulars of exports is little more than bureaucracy gone mad, and Nosy Parkerism in the extreme. I cannot see that it can fulfil any useful function.
I violently oppose the provision relating to the exemption of private companies. This is absolute nonsense. I have had many representations on this subject. If I set up in business as a grocer in the High Street and decide to make myself into a limited company, what business is it of anybody else, let alone my competitors down the road, what my accounts and balance sheets may look like? What business have they to know what I pay myself or my wife, who is on the board with me? It is no business of anybody else. It was condemned by the Joint Under-Secretary for the Department of Economic Affairs, the hon. Member for Manchester, Cheetham (Mr. Harold Lever), at the conference to which I have referred.
The hon. Member for Kingston upon Hull, North (Mr. McNamara) asked whether there is some sort of limit. A formula could be found to exclude small family companies. One suggestion is that we should exclude from these provisions those companies of which the owners and directors are the same people. I can see no reason why they should not be exempt.
The other error of commission concerns the disclosure of income. At best, this is pointless and at worst it is nosey parkerism of the worst sort. It will encourage the switching of executives. There will be a temptation to lure an


executive from one company to another. Also, if it is intended merely, by some vague powers of stupid public opinion, to keep the income of directors down, it will lower the standards of company leadership, to the detriment of shareholders and business as a whole.
The omissions are more numerous than the errors of commission. We are told that there is to be another Bill, and we look forward to it. I hope that when we discuss it we shall be able to dilate on the deep philosophical matters referred to by the President of the Board of Trade. But I should like to know why some smaller and more immediate reforms cannot be included in this Bill. It is all very well for hon. Members opposite to complain that nothing was done when my party was in office. As was made clear in another place, plans were made and a Bill was in draft in the summer of 1964, two years after the Jenkins Report, and, but for the General Election, it would have been brought before the House.
The Government have had three years to bring forward a Bill and more than that to think about it. They have now brought forward this half-hearted Bill. If they could not bring forward a proper Bill, I regret that they could not have included in this Bill provisions dealing with non-voting shares, which are generally criticised in the City. I know that there are views that non-voting shares, or A shares, should be allowed, and that they have enabled certain companies, such as Marks and Spencers, to develop. But there is a very good argument for saying that these shares should be labelled as such and not described as A shares or something else. Provisions on these lines could have been included in this Bill.
I also bitterly regret the Government's decision to throw out the provision allowing no par value shares. Another place decided that this should go in, and the Jenkins Report was in favour. Every conceivable informed opinion in the City or elsewhere has argued that no par value shares should be allowed, yet, for reasons which to me are totally obscure, the Government dig their toes in. We shall return to this subject in Committee.
I regret that not more has been done to deal with the serious cases of fraud and company manipulation which have

taken place in recent years. Some of the cases of fraud of defalcation make robberies like the mail train robbery seem like peanuts, but they do not get the same publicity. The Fraud Squad is grossly overworked. I understand that unless the amount of fraud is at least £100,000 only a sergeant deals with it. This has caused great concern in the City and among the investing public.
I am not sure what the solution is—whether the Board of Trade should have more powers, or should be able to operate more quickly. Certainly it operates remarkably slowly at present. What happens is that somebody gets board room control, with a large, inert mass of shareholders, and then salts off his money into either existent or nonexistent companies in Lichtenstein, or Switzerland, or similar places, and then vanishes. Two years later, the Board of Trade considers whether it dare have some sort of inquiry into this company, for fear of a run on the Stock Exchange. I do not know the answer, but something is clearly wrong. Perhaps the Board of Trade needs more powers, or perhaps there should be a city "watchdog" body to move in more quickly and perhaps with less dangerous publicity than the Board of Trade. This should be dealt with now rather than in the future.
Many more people lose money through directors' negligence than through downright fraud. The Government give too little attention to the rights of minority shareholders in such cases. There are far too many errors of commission and omission to enable me to praise the Bill. It stems largely from the inherent suspicion of companies of hon. Members opposite. They have a tendency to regard companies as enemies to be interfered with and restrained, but the Government should realise, despite their doctrinaire supporters, that we depend for our existence on a free enterprise system of which the limited liability company is an integral part. This is a half-hearted Measure—one tinge, nevertheless, of the acid. If we cannot remove some of the prejudices opposite in Committee, we may be able to enlighten their ignorance.

6.12 p.m.

Mr. David Marquand: I welcome the Bill, but what I welcomed most was my right hon. Friend's assurance that he would bring in a much more


fundamental reform in the lifetime of this Parliament. I take up his invitation to speculate on the issues with which a further reform of company law ought to be concerned. The right hon. Member for Altrincham and Sale (Mr. Barber) rightly said that modern company law should be concerned not just with the interests of the shareholders but with the contribution of the company to the economic efficiency of the whole community. This is right, but I think we should go further, and think also of the social rôle of the company.
The 19th century laissez-faire system, the ghost of which still seems to linger in the subconscious of hon. Gentlemen opposite, assumed that the best allocation of economic resources would result from the working of free competition. If there were free competition, it was thought, the inefficient would be destroyed. Those that destroyed them would be those best fitted to survive. But, as we all know, when we are not being ideologues but we are looking at the real world, this is not how the capitalist system in any of the Western developed countries works today. We have had the growth of what economists call "imperfect competition"—the development of giant firms which can "rig the market". So the laws of unrestrained laissez-faire capitalism no longer work in large parts of the private sector.
This is why it is necessary, to achieve the optimum allocation of resources, for the Government to intervene in many ways. This is why we have set up "Little Neddies" and the I.R.C. and this is why the encouragement of economic efficiency should be one of the criteria which should govern the next reform of company law. In addition, we should recognise that the modern private company is a massive aglomeration of social power and that its activities have repercussions on people's lives to such a degree that we cannot simply allow its activities to be regulated by economic considerations alone——

Mr. Gresham Cooke: When the hon. Member talks about a private company, is he talking about an exempt private company or one publicly quoted on the Stock Exchange?

Mr. Marquand: I am sorry—I meant the privately owned company, as opposed to the public corporation——

Sir G. Nabarro: He means I.C.I.

Mr. Marquand: Yes, I mean big, privately-owned companies.
As the Government recognise, I think, the present Companies Bill does not, and is not designed to, go very far to meet either of the two general principles which I have set out. The next instalment of company law reform should try to do both of these things. It ought particularly to concentrate on the company's responsibility to its employees.
There are all sorts of obvious dangers in the idea of direct election of worker representatives to boards of directors. The difficulty is that such representatives would either be "captured" by their fellow directors and try to promote the economic well-being of the company, in which case their relationship with their worker "constituency" would be somewhat confused and difficult; or they would still retain their primary loyalty to the people who elected them, in which case their economic contribution might be of little value.
This conflict, which would inevitably be created, between these two responsibilities makes a proposal for directly elected workers' representatives one to be carefully considered. What the next reform could do, however, is to make mandatory throughout the private sector the practices of the best parts of it in regard to consultation between management and workers. This is the right area to consider, rather than direct formal, elected participation in the boards of directors.
I turn now to Clauses 6 and 8, which deal with the disclosure of directors' emoluments and those of high-paid executives. We have heard a lot today—and I have the depressing feeling that we shall hear a lot more—about the appalling suffering and hardship of the grocery store owner with a little shop in the High Street and the iniquitous practices of the Government towards him. I do not believe that it would be difficult to devise an exemption to safeguard the smallest family firms from disclosing these statistics. However, it is absolutely vital to ensure that the larger companies, whose shares are not quoted on the Stock Exchange, disclose their figures in this matter.
The argument in favour of very full disclosure—not just the disclosure of directors' emoluments but also the pay of top executives—is very strong. One hon. Gentleman opposite asked why the Government were taking this action. He called it "Nosy Parkerism" and said that it would serve no useful purpose. That is rubbish. This provision will serve two extremely important functions. There is absolutely no doubt that at present there is a shortage of basic information in this sphere. We do not know the details of the structure of managerial rewards in private industry. What evidence exists suggests that the structure is a haphazard one and is arbitrary and illogical.

Sir G. Nabarro: Even if all this information were available, what would the hon. Gentleman do with it? I suggest that even if he had it he would not know what to do with it, and that even if he had it the information would be purposeless. A vast mass of information and statistics about what 400,000 little businesses are doing—what is paid to their partners or directors—would be useless to the hon. Gentleman.

Mr. Marquand: I do not agree. The mere publication of the information would itself help to make the system more rational and logical because people would become aware of how extraordinarily illogical and arbitrary the present arrangement is.

Sir G. Nabarro: Rubbish.

Mr. Marquand: People do not know where they stand.

Mr. John Hall: Mr. John Hallrose——

Mr. Marquand: I do not wish to detain the House, and if I keep giving way my speech will become inordinately long. 
Hon. Gentlemen opposite frequently claim that managers are underpaid. None of my hon. Friends is arguing in favour of a policy deliberately to underpay managers. We are aware of the scarcity of highly-skilled managerial talent and, in these circumstances, it is sensible for managers to know just what is the market rate for the job. Hon. Gentlemen opposite keep talking about the need to pay the rate for the job, but what is the rate? What rate should directors receive? Should they receive the rate paid

by I.C.I. or the very much smaller rate paid by some other big firms? If this information were disclosed, the mere fact that it was available would help these people to know where they stand, and it would make the whole situation more rational.

Mr. Hall: Mr. Hallrose——

Mr. Marquand: No. I trust that hon. Gentlemen opposite will allow me to complete at least one part of my argument without interruption.
The second reason why it is important that the fullest possible information should be made available is the assistance it will give to the Government's incomes policy. There is continuous pressure in the public sector for salary increases as a result of the magnetic attraction of what are perhaps wrongly believed to be the high and inflated salaries paid in the private sector. One sees this clearly in the Civil Service and in the pay award made to doctors last year.
People working in the public sector believe that very high rewards can be earned in the private sector by people with similar skills and education to their own. There is, therefore, a natural pressure for the levels of pay in the public sector to be raised to a comparable standard. This has been one of the weakest spots in the Government's incomes policy. Since we have not known what is going on in the private sector we have not been able to take appropriate action to prevent excessive increases in the rates of emoluments in that sector from taking place. Thus we have been unable to damp down the pressure for equivalent increases in the public sector.
I am not saying that if this information becomes available it will necessarily follow that any action will be taken. Maybe there is no very rapid rise going on in the rate of increase in rewards in the private sector. We do not know because the evidence either way does not exist. If it did exist, it would at least be possible to frame a rational policy in this matter. We cannot begin to operate a successful incomes policy unless it is made to apply not simply to wages but to earnings generally, including very high earnings. But we cannot begin to solve our basic economic problems unless we


have a successful incomes policy. I therefore welcome this part of the Bill, because it will help to extend the incomes policy to the whole sphere of salaries and total emoluments, and because an extension of that kind is essential for the success of the policy.

6.28 p.m.

Mr. Rafton Pounder: There is much to commend in the Bill, but I will not occupy the time of the House by reiterating any of the arguments adduced by my hon. Friends. Instead, I wish to direct the attention of the Government to a problem to which reference has not been made in this debate.
For some time a new and, in my view, deplorable condition has been appearing on a growing number of share issue application forms. The growing practice to which I refer is that in an ever-increasing number of offers for sale to the public, a condition is being imposed which requires that the cheques in support of applications must be drawn on banks within Great Britain, as distinct from the United Kingdom. The result has been to debar those applicants, like myself, whose cheques are drawn on Northern Ireland banks. [Interruption.]

Sir G. Nabarro: Order.

Mr. Pounder: This is tantamount to a very unsavoury form of financial discrimination. It was first brought to my attention about 12 months ago and I immediately wrote to the Government. Since then there has been a considerable increase in the number of share issues which have discriminated against Northern Ireland applicants and the situation has reached the point when this form of discrimination is almost the general rule.
In recent months my hon. Friend the Member for Belfast, North (Mr. Stratton Mills) and I have been compiling a list of the more glaring instances. Regrettably, hitherto the whole question of responsibility—certainly from the point of view of Departmental responsibility—for share issues has fallen into a kind of administrative no-man's land somewhere between the Treasury and the Board of Trade. This Companies Bill provides an admirable opportunity to remedy this

discrimination. I hope that the Government will desist from the attitude which they have hitherto adopted of saying that this is a field of activity in which they would rather not engage.
I have had two kinds of answers from the Treasury Bench to questions submitted on this subject recently. Firstly, the argument was advanced that there had been a bank strike in Northern Ireland and that consequently cheques drawn on Northern Ireland banks could not be cleared. That strike took place in May and June of last year, but it was in February last that Neville Securities imposed what I term the offending discriminatory condition, and there was no bank strike then, nor a hint of one.
Afterwards there came an even more novel kind of official answer, namely that it takes considerably longer for Northern Ireland cheques to be cleared than for English and Scottish cheques to be cleared. That is an utterly nonsensical line of argument. It takes two days to clear cheques drawn on Northern Ireland or Scottish banks and presented in London. It probably takes exactly the same time to clear cheques drawn on provincial banks and presented in London.
My hon. Friend the Member for Belfast, North and I have been engaged in an exercise on this which shows that a cheque drawn on the National Bank in Belfast and a cheque drawn on the District Bank in Manchester, both presented in London on 13th December, were both cleared two days subsequently. The argument that it takes too long to clear the cheques is utterly invalid. Of course, there is a time factor which is important when one is considering shares issues. I am fully aware of Section 50(5) of the 1948 Companies Act which, by implication, provides that applications for securities issued or offered for sale should be revocable after three days, but that is by implication rather than by statutory obligation.
It has been repeatedly stated in correspondence which I have had with Government Departments on this subject that there is no intention to discriminate against Northern Ireland investors. That may be so, but the cold fact remains that Northern Ireland investors are being discriminated against. I have even heard


the absurd argument that it takes even longer to have cheques cleared when they are drawn on banks in the Republic of Ireland. What relevance this has to Northern Ireland cheques eludes me.
About two months ago there was a case relating to the issue of the House of Sears (Holdings) Limited in which one of the conditions was that cheques accompanying applications must be drawn on a bank in Great Britain. The bank handling the issue was the Midland Bank. Yet the Midland Bank has as wholly-owned subsidiaries two of the major banks in Northern Ireland—the Belfast Bank and the Northern Bank. In this case the Midland Bank was not accepting cheques drawn on wholly-owned subsidiaries. The statutory period for the clearance of cheques in connection with share issues is four days but I hope I have shown that cheques presented in London and drawn on banks in Northern Ireland can be cleared in two days. I hope that the Government will take the point seriously because it is affecting a considerable number of people.
I am not seeking to make a mountain out of a molehill but this is not a small molehill. We in Northern Ireland have a substantial investing public who are being precluded from applying for almost all new issues, and that is a serious situation.

Mr. Speaker: Order. I hesitate to interrupt the hon. Member. I am listening to him with care, but I hope that he will link what he is saying with the Bill that we are discussing.

Mr. Pounder: I am certainly trying to do so, Mr. Speaker. It is implicit in company legislation that the public at large should be given an opportunity to subscribe for shares. That is provided in the 1948 Act. That opportunity is now being consistently denied to Northern Ireland investors. I take as another illustration, which I hope is in order, a rights issue. There was a case in November of an issue where separate preferential application forms were issued to existing holders and separate forms for new applicants, and existing Northern Ireland holders were precluded from applying.

Mr. Speaker: Order. I want the hon. Member to link the point he is making not with company legislation in general

but to the Second Reading of this Bill which has certain definite purposes.

Mr. Pounder: What I am trying to do—and I hope this is in order—is to ask the Government to include a new Clause in the Bill to this effect. I am trying to describe the background for what I am seeking in all seriousness and sincerity, namely a new Clause which I believe could be fitted into the framework of the Bill without altering the spirit or the other contents of the Measure.
Only last week there was an issue with seven clear days between the closing of applications and the commencement of dealings. Again, this exclusion operated against us. I beg the Government to consider this. If they would like me to draft a new Clause, I should be delighted to do so because this matter has now got to a point where all the best issues are being ruled out and we in Northern Ireland are becoming second-class investors. I believe this is the opportunity and the relevant occasion on which something could be done by the Government to remedy this omission.

Mr. Jay: May I ask what the new Clause would do?

Mr. Pounder: The Clause which I envisage would prohibit any issuing house from restricting the number of banks situated in areas within the United Kingdom on which cheques in support of applications may be drawn.

6.37 p.m.

Mr. Joel Barnett: I hope the hon. Member for Belfast, South (Mr. Pounder) will forgive me if I do not follow him into the realms of his new Clause referring to Northern Ireland.
I wish to refer to the main part of the Bill and the question of the privileges at present given to exempt private companies. In the last debate on this subject I said that I was not in favour of a Bill for Nosy Parkers. I still am not in favour of that sort of thing. I do not want unnecessary information, nor information for its own sake. From this standpoint I look at Clause 37 first in relation to turnover and rents. While I agreed with the conclusions of the right hon. Member for Altrincham and Sale (Mr. Barber) I found some of his arguments very weak indeed. They were


nothing more than had been stated in another place by the noble Lord, Lord Erroll. The only valid point was that there would be some disadvantage as against major competitors.
This needs to be examined because it might affect our whole thinking on the matter. What sort of disadvantage is it? We are thinking of small companies of three types, retail, wholesale and manufacturing. The example given of the retail company was that of a small retail shop which, it was said, would be at a disadvantage against a major combine because that combine would know the turnover of the smaller company. It was suggested that it would then be more liable to takeover. The right hon. Member did not reply to my intervention, that such a company would not have to allow itself to be taken over. Any capable estate agent considering a small retail shop and the site on which it stood could give a very fair estimate of the turnover, and anybody with a reasonable understanding of a balance sheet and, given the stock and debtor figures, would be able to come to a very good estimate of the turnover of a wholesaling or manufacturing business.

Mr. John Smith: There is an important consideration which my right hon. Friend did not mention, and which is that if a large company can accurately estimate the turnover of a smaller company with which it does business, it can tell how much of that smaller company's turnover is represented by the business which it does with it and it can, therefore, see whether by withdrawing its custom suddenly, as has often been done in the past, it will not only lay the small company open to take-over, but ruin it. This is a material consideration.

Mr. Barnett: The only point which I was making and which the right hon. Gentleman did not answer was that the information would be available to a major company anyway. The right hon. Gentleman did not say that he disagreed with me. I do not necessarily disagree with the right hon. Gentleman's conclusions. The only question at issue is whether having the information would help, whether it would be of any particular value. I believe it would be of no value at all with the very small company.
When we discussed this matter in our last debate on the subject, I suggested that we might consider limiting these provisions by the size of the assets, profits, or share capital of the companies with which we were dealing, but because I am doubtful whether it would be an additional spur to efficiency in companies where the shareholders and the directors were one and the same and because of the difficulty of drawing a dividing line anywhere, I am prepared to say that we should exempt all unquoted limited companies from the requirement to publish details of turnover and rent. This would be reasonable, because in any case large unquoted companies are those most likely to apply to become unlimited because they would not want their balance sheets to be disclosed.
I have some comments to make on the subject of unlimited companies. My understanding of the Bill as it stands is that it would be possible for a company to go unlimited when the return is to be submitted so that it would not have to submit the return. Presumably—and I can see nothing to prevent this—immediately afterwards it could become limited again, and by doing this once a year it could exclude itself from submitting accounts at all. If that is not the case, I should be glad to be told where the appropriate provision is to be found.
Another matter arises in connection with the first year, the transitional year. As I understand Clause 36, if a holding company or a subsidiary company is limited during the course of the year for which the return is submitted, it would not be exempt from submitting accounts. That seems to indicate that if a small company is a single company that is all right and it would be exempt, whereas if it is part of two or three companies one of which in the first year is a holding or subsidiary company, it would not be exempt from submitting accounts. I would be glad to have my right hon. Friend's views about that.
This brings me to another aspect of Clause 37, the subject of the disclosure of directors' remunerations. This is an entirely different matter from that of turnover and rents. I have given much thought to this, because I was unhappy about these provisions in the first Bill. If a profit and loss account, which Clause 37 would not


exclude, has to be shown, all that will be shown is the net profit after directors' remunerations. For a small private company to show the net profit after directors' remunerations would be to give a totally meaningless figure and we might as well exclude the whole of the profit and loss account. That may be what the Opposition have in mind, but certainly as the Clause stands such a figure would be quite meaningless.
I return to my criterion of the value of any information for which we are asking. To most creditors it would be of no particular value to have disclosure of the directors' salaries. They would only Want to see the balance sheets—although I know many creditors who, if a balance sheet was not healthy, would like to be aware of how much of their money—and it would be their money—the directors were taking as salaries. However, by far the most important group of creditors are the workers in a company, because, of course, they are creditors of the company for at least one week's wages and possibly also holiday pay and so on—quite apart from other reasons which would entitled them to be interested. Many instances will come to the minds of hon. Members opposite of when companies have gone into liquidation and this type of creditor, that is, the workers, have suffered because of the company's insolvency.
These creditors are very much entitled to know just how much the employers are taking of what might be their money. There is some value in giving this information to them, but, while I would make this information available to creditors, including the workers, I would not want it to be given to every local busybody, because I regard the information as being of value only to creditors. Therefore, provided that it is made available to creditors, I would not make it available to everybody else. I say that with much heart-searching. I am not altogether happy about giving the impression of clobbering small companies, but I believe that it is right that they should pay for this considerable privilege of limiting their liability.

Mr. Bruce-Gardyne: Would not the hon. Gentleman agree that all the creditor needs is the global sum of directors'

salaries, so that if Section 196 of the original Act were applied, that would meet his case?

Mr. Barnett: I do not accept that. That could be very misleading with a small company.
I now want to deal with the provisions affecting insurance companies. I have been rather surpised by the comparative complacency with which both Front Benches have accepted these Clauses as being adequate. I accept that these Clauses have been drafted in consultation with the British Insurance Association and that they lay down some very stringent conditions. However, the only way in which to consider them is to ask the straight question: "With these Clauses, could it happen again?" In other words, could there still be motor insurance company failures?
We all know the dreadful consequences of some of the things which have happened and of the experience of constituents who have been affected by insurance company failures. The important question is whether that could happen again if these Clauses were passed. If it could, we would not be fulfilling our responsibility by allowing these Clauses to stand as they are.
I am thinking of a young girl who is a constituent of mine and who was injured in a crash, seriously disfigured and who suffers semi-paralysis. She could not get a penny, because the man ultimately responsible was without real means. This, of course, is the nub of the problem. There are many people who drive cars which they cannot afford to buy, let alone run. Nevertheless, it is a fact that they do so and we must recognise it. But because they buy cars of that sort they find themselves in the situation of trying to find the cheapest forms of maintenance, repairs and insurance.

Mr. Temple: Will the hon. Gentleman tell us whether the girl to whom he referred was a passenger?

Mr. Barnett: Yes, she was a passenger. I am still hoping that we may be able to do something for her.
I regret that my consideration of these Clauses leads me to the conclusion that the answer to the question, "Can it


happen again?", must be "Yes". Unfortunately, there could still be motor insurance company failures.
In advising the Government, the British Insurance Association was genuinely trying to prevent more failures. It was trying also not to recommend a system which would prevent small companies from entering the field and thus create a monopoly for the big companies, and, because the Association is understandably biased, it did not want to hand the whole thing over to the Government. But I believe that these three aims are incompatible. Incidentally, I am not sure why insurance companies should be so concerned because motor insurance, as I understand it, is not profitable. I cannot help being reminded of the businessman losing money who, when asked why he did not close down, replied, "What would I live on if I did?". It seems a little odd that the British Insurance Association set itself that particular aim. However, because my overriding priority is the safeguarding of the public interest, I should be prepared to sacrifice the two latter aims, and I shall now explain why I believed that the provisions of the Bill as drafted will fail to prevent further motor insurance failures.
Too many of the powers to be given to the Board of Trade are permissive, and I doubt that it has adequate staff to prevent companies which are getting into difficulties from continuing in business longer than they should. For example, Clause 54 gives the Board of Trade power whereby it "may" add to the requirements with regard to investments and so forth. Under Clause 55, it "may" impose certain restrictions. Even where the powers are mandatory, there tends to be ambiguity. For example, Clause 51 deals with the question of sufficiency of assets, but, although it begins with a reference to an excess of assets over liabilities of £50,000, it goes on to refer to £100,000 share capital. It is not clear to me—I should be glad to have an assurance on this—whether this Clause means that, if a company has £100,000 share capital and it then loses £50,000, because it will still have a surplus of assets over liabilities of £50,000 it can continue in business. According to my understanding of the Clause, it could still do so.
Perhaps the most stringent of all is Clause 52, the one insisting on reinsurance, but the value of this is reduced because, although the Clause begins by saying that there must be reinsurance, it goes on to refer to adequate arrangements which "will be made" or it being "justifiable not to make arrangements", in which case, apparently, everything will be all right. Again, the mandatory is reduced to the permissive.
It seems to me, therefore, that fraud could still go on, though admittedly, perhaps, for not so long as before. Equally, the genuine company in difficulties, the company losing money, could still continue in motor insurance business. My experience is that directors of companies which are losing money are notoriously optimistic. All the evidence of liquidations shows this to be true. They generally carry on far longer than they should, certainly far longer than it takes the Board of Trade to find out that they should not be carrying on. In my view, it is clear that there is not enough in these Clauses to prevent further motor insurance company failures.

Mr. Jay: My hon. Friend has not mentioned the most drastic power of all, the power of the Board of Trade to refuse authority to companies to carry on motor insurance at all. There could be no more drastic power than that, unless we are to forbid private insurance companies to engage in motor insurance.

Mr. Barnett: I shall come to that in a moment. I was dealing with the permissive powers of the Board of Trade, and I had it in mind to refer to another Act, the Protection of Depositors Act, 1963, under which the Board of Trade has had permissive powers to prevent companies from advertising for deposits. This has not prevented, for example, the Davies Investments company going "bust", with £8 million involved. There were permissive powers in that case, but they were not effective, and I do not believe that the permissive powers given to the Board of Trade under this Bill will prevent companies from getting into difficulties, with consequent loss for many people and other serious problems arising before the Board of Trade takes action.
Something must be done. There are two alternatives. Either we make the


Bill so stringent as to prevent small companies coming in—which the British Insurance Association did not want to do—or we have a Government motor insurance corporation. Those are the only two alternatives. I have my own preference there, but I am certain that what we have in the Bill will not do.
If we are deliberately to prevent competition and, at the same time, we insist, quite rightly, on third-party insurance being compulsory, we must not shirk our responsibility. In my view, we must have a Government motor insurance corporation. I believe the arguments lead conclusively to this alternative.

Mr. Jay: My hon. Friend will agree that even that would not prevent frauds unless it was a statutory monopoly and no one else was allowed to carry on the business.

Mr. Barnett: Precisely. That is what I have in mind. My overriding priority is the safeguarding of the public interest, and I can see no other way of doing it. I accept entirely the implication of what my right hon. Friend has said.

Sir G. Nabarro: I recognise these difficulties, but will not the hon. Gentleman agree that if we had a statutory State monopoly for motor insurance, we should be asking the State to take over an undertaking which has so far proved unrewarding. As only a minority of citizens own motor cars, would it not be tantamount to asking the majority, the non-motor car owners, to subsidise motor car owners through their rates and taxes?

Mr. Barnett: I do not accept that. I start from the basic assumption that one must protect the public in this matter. It is not only people who own motor cars who are involved. We all know this from letters we have had from constituents. People who do not own motor cars can he sufferers under the present system. To talk of a minority of people who own motor cars and to use that as an argument against doing what I recommend, just because they are a minority, is not an argument which I should expect to hear from the hon. Gentleman.

Sir G. Nabarro: I did not put that argument.

Mr. Barnett: But it is tantamount to that. [HON. MEMBERS: "The hon. Gentleman did say that."] I should be happy to argue the matter with the hon. Member for Worcestershire, South (Sir G. Nabarro) on another occasion, but I know that there are others who wish to speak and I want to get on.
There is another urgent matter of public interest, the question of small banking companies such as Davies Investments to which I referred earlier. I know that it can be argued that those who want a higher-than-average interest rate are greedy, foolish or simple—or a combination of all three—but this is no reason why we should not protect them. Such protection was intended by the Protection of Depositors Act, 1963, but, as I have said, that Act has proved ineffective.

Sir Harmar Nicholls: Not enough cotton wool to go round.

Mr. Barnett: The hon. Gentleman may prefer not to protect them, but, presumably, he supported the Protection of Depositors Act in 1963.
In this matter, as in the matter of motor insurance, we are trying to balance incompatibles. We try to give protection to small investors and, at the same time, we allow small banking companies to carry on as they have been doing. When a small banking company of the Davies Investments type starts off by offers of high interest rates, as it must, it is in trouble from the start. In order to pay a high interest rate—it usually borrows from other banks and then has to borrow money from more depositors—it runs into more and more trouble because it has to invest with a degree of risk so high as to enable it not only to pay the high interest rate it has offered but also to pay itself some profit as well. Generally, the end is inevitable.
We need not be fortune tellers to forecast that there will be more failures of banking companies like Davies Investments. I understand from an Answer to a Question today by my right hon. Friend that there are 111 companies authorised under the Protection of Depositors Act. It is clear from the ineffectiveness of that Act that it is no use going for a halfway house. The priority must be the public interest, and if that is incompatible with allowing such


companies to exist, then I am afraid that they must not be allowed to exist.
We must strengthen the Protection of Depositors Act. I hope that my right hon. Friend can assure us that under Section 3 of that Act he will refuse all advertising pending such revision. Meanwhile, I hope that he will help in this matter with perhaps another new Clause in the Bill, a Clause which would perhaps restrict the companies' borrowings, including those from depositors and other banks, to at least a reasonable proportion of the amount of their issued share capital. Otherwise, it is rather ludicrous that so many depositors can lose so much whilst the shareholders—generally the promoters—of the companies have so little at stake by comparison. I hope that I have not trespassed beyond the rules of order, but in Clause 93 of the Bill there is reference to the Protection of Depositors Act, and amendments to it.
In opening for the Opposition, the right hon. Member for Altrincham and Sale did himself and the Opposition no good by trying to get the best of both worlds with generalised and unsubstantiated attacks on the Government for allegedly having some kind of vendetta against small companies, when he knows in his heart that he really agrees with the Bill. I believe that there is a great future for small companies; their management is far more dynamic in many instances than that of the larger ones. With the exceptions that I have mentioned, I support the Bill, because I know that the efficient small company will not be hurt by it.

7.2 p.m.

Mr. John M. Temple: Like the hon. Member for Heywood and Royton (Mr. Barnett) I attach a great deal of importance to the insurance Clauses of the Bill. The public will be more interested in those Clauses than in any other.
My right hon. Friend the Member for Altrincham and Sale (Mr. Barber) wisely also picked out the insurance Clauses, but he made his views well known on the general approach of this side of the House to the Bill. I agree with him that the recommendations of the Jenkins Committee were adequate, that they should not have been exceeded, and that where the Government have exceeded them they have fallen into error.
I congratulate the President of the Board of Trade on being very much less contentious in his opening speech than was the Lord Chancellor in another place. I think that that bodes well for the progress of the Bill in Committee, because I felt that if he made as contentious a speech as the Lord Chancellor the Bill might well be in Committee until Christmas or even longer.
There was one aspect of the President of the Board of Trade's speech which I noticed particularly. He said three times that he was bringing our company law into line with that of the United States.

Mr. Darling: In some respects.

Mr. Temple: I agree. But there was no reference to aligning our company law with that on the Continent of Europe. If the Government claim to be forward-thinking, it would have been wiser to adjust company law now to the provisions in the European Economic Community rather than making adjustments which would have suited us had we been forming an Atlantic alliance directly with the United States of America.
The President of the Board of Trade gave the House an invitation which I shall take up. He invited hon. Members on both sides to make suggestions of further provisions which might be either in this Bill or in a future Bill. High on a priority list of omissions, I would put the question of dealing with further legislation on unit trusts. They have hardly been mentioned in this debate today, but they are the subject of 21 specific recommendations in the Jenkins Committee's Report. I believe that the unit trust movement, growing fast as it is, needs the implementation of those recommendations.
My right hon. Friend the Member fur Reigate (Sir J. Vaughan-Morgan) said that very often the Board of Trade was responsible for locking the stable door after the horse had departed. I admire the unit trust movement enormously. However I have great sympathy with the many small people who invest in it, in that they are small cogs in a very large and intricate system.
Today we see investment trusts converting themselves into unit trusts, and


the unit trust movement itself is growing fast. The Jenkins Committee recommended legislation several years ago and my right hon. Friend the Leader of the Opposition gave a commitment in 1964 that we would legislate on unit trusts; yet in this Bill, which cries out for the inclusion of unit trust legislation, it is entirely ignored.
The lack of further control over takeover bids is another serious omission. In my reading about financial matters—and I have been connected with financial matters to an extent all my life—I have been interested in the growth of takeover techniques. It is high time that this was dealt with in an immediate Bill, and I am very disappointed that the specific recommendations of Jenkins are not being dealt with in this Bill.
It is a great disappointment to me that no par value shares are not to be dealt with in the Bill. In my early days I worked on Wall Street, which was then dealing in no par value shares and had been for 30 years before. We have not brought ourselves up to the standard of the United States of America in that respect, although the President of the Board of Trade was pleased that he was moving in the direction of the United States of America in other ways.
Tonight I want to devote most of my time to the question of insurance companies. Before coming to that, may I say that I entirely agree with my right hon. Friend the Member for Altrincham and Sale about the abolition of exempt private companies, and I think that we shall have support from the hon. Member for Heywood and Royton. I think that the publication of turnover figures is unnecessary in the case of those companies which do not have a share quotation on the Stock Exchanges.
But there is one aspect of the exempt private companies which I believe will damage the small traders very much. Representing as I do the City of Chester, a great retail centre, I have in mind those small traders in the High Street. They are mostly operating under limited company status, but are subject to severe competition from the multiples. They are also in competition with the unlimited company and with partnerships. I am afraid that what the Government propose

will drive a great many limited companies into the unlimited company class, and I would regard that as a retrograde and most unfortunate step which should be wholly unnecessary.
Another small but important matter concerning exempt private companies is the question of one or two very large exempt private companies which are shipping companies, and which have been having exemption from publication of their reserve position because they were exempt private companies, rather than because they got special exemptions from the Board of Trade. Will the Minister of State say how forthcoming he will be about granting further exemptions to shipping companies? The President of the Board of Trade said in his opening remarks that he was conscious that there was severe competition in the international trades, and therefore it would be valuable if the Minister of State could give further reassurances on that matter.
I pass briefly to the question of the disclosure of what I can only call the extraordinary and misleading export figures. I know a little about statistics, and they can be very misleading, but the publication of export figures of limited companies positively makes me laugh, because the whole thing is a complete nonsense. The figures will not be compiled in any way that will give statistical advantage to anyone. The Board of Trade can easily get the statistical information about exports if it wishes to. If it wishes to have evidence of the exporting capabilities or capacities of a company, it should go about the matter in a much more sophisticated manner. It would then know how much of the ultimate component sent abroad is manufactured by the particular company, or in what respect that company is purely an assembler of other people's components. I believe that this will be shown in Committee as absurd.
The Board of Trade has also slipped up badly in another respect. The Bill ignores very important invisible exporters, such as a big limited company in insurance broking. The big international insurance brokers with offices in this country have about 45 per cent. of their busi-


ness in overseas premiums. They are probably the best dollar and other currency earners that we have. Yet they are not going to publish these figures of exports because they are to be excluded specifically from doing so under the Bill.
We have had many indications of the Government's dislike of the hotel industry, but it is a very valuable earner of invisible exports and it should have the opportunity of publishing its figures, and at least a chance of getting on the Honours List which we have heard about. No doubt, the Prime Minister will be having regard to export figures as published by certain companies when making his selections?
The gravamen of my speech concerns insurance. The Clauses dealing with insurance are immensely important but, like the hon. Member for Heywood and Royton, I am dubious as to whether the strength of these provisions is adequate. British insurance has had a magnificent name all over the world and I am sorry to have to tell the right hon. Gentleman that the recent failures have had a damaging effect on the good name of British insurance. London is probably still the habitat of the most important insurance firms in the world but other insurance centres are growing very fast and anything occurring in London that has a detrimental effect on any insurance company is news in insurance throughout the world.
I suppose that the turning point for British insurance throughout the world was the San Francisco fire and earthquake in 1907. Liverpool, where I was born, has been in the forefront of insurance for many years. A company I know of recently absorbed by the Royal Insurance Co.—the London and Lancashire—was one of those very much involved in the disaster. It paid up the next day, like the other British companies. From then onwards, British companies had a worldwide business in insurance.
Recent crashes have done a considerable amount of harm. Unfortunately, a company can set up with a high-sounding title—such as the London and Cheshire. It was a most unfortunate title linking two great and important parts of the country. In such circumstances, a great many policy holders are left uncovered. That is why I mentioned the point about

passenger insurance when the hon. Member for Heywood and Royton spoke. On the Continent, passenger insurance is to a large extent compulsory but that is not the case here. I believe that it should be and this is an aspect of the Bill that we must look into extremely closely.
I am doubtful whether the Board of Trade has not all along had very much more power than it has made out. The chief general manager of the Royal Insurance Co., in an interesting letter to The Times recently, pointed out that the Board of Trade could have acted had it wanted to.

Mr. Darling: Mr. Darlingindicated dissent.

Mr. Temple: The Minister of State shakes his head, but this is a matter of legal opinion and lawyers can err on either side. The fact remains that the opinion is held very widely in responsible insurance circles. I believe that we must make certain that the insurance provisions of the Bill are strong enough to hold the position so that we shall not see more failures on the scale of recent months.
I have pointed out that this matter affects the public very much. Very often, when a person is trying to insure a car or a motorcycle it is the first time that he meets an insurance company and, therefore, motor insurance is important. It is our duty as legislators to see that motor insurance companies are as secure as it is humanly possible by legislation to make them.
A great many people today are, from the accountancy point of view, running cars which they cannot afford. Naturally, they go to the company offering the cheapest insurance. I am afraid that they shop around to see where they can get the cheapest cover so that they can obtain a cover note just to satisfy the licensing authority.

Mr. Keith Stainton: Would not my hon. Friend concede that there is ample ground for confusion in the minds of the insured, especially the new insured, when there are tariff offices quoting rates much of a muchness as distinct from non-tariff offices, most of which are quite reputable? Is not the confusion within the structure of insurance itself?

Mr. Temple: I would not confirm what my hon. Friend says in that non-tariff


rates are always lower than tariff rates. But the fact remains that I am now speaking about uninitiated people seeking insurance for the first time and it is our duty to see that all motor insurance—indeed, all insurance—is as financially sound as is possible because otherwise what I would call the brokers "on the fringe" of the business are inclined to channel business to those companies giving the largest commission rather than to those which are soundly based.
I do not believe that it is possible to import into this Bill legislation with regard to the registration of insurance brokers. That is a separate but allied matter but it is one which should naturally flow from the Bill. Passenger insurance, as I have said, is I believe obligatory on the Continent and I believe that we should take powers in this Bill to align ourselves to future legislation which we shall have to get used to if we join the E.E.C. Therefore, we should now seek to move towards compulsory passenger insurance which would cover just those circumstances that we have had drawn to our attention today.
I do not believe that the figures of £100,000 issued capital and £50,000 surplus assets are anything like enough. Perhaps I have omitted to say that I have a financial interest in insurance for I have been for almost 30 years an underwriter at Lloyds. In the case of the Lloyds syndicates, large reserves are called for and we also have a central guarantee fund.
The question of re-insurance has been mentioned and it is also referred to in the Bill. Here again I do not believe the provisions are strong enough. I believe that there should be compulsory re-insurance as between companies setting up and that the question of experience, which has not yet been mentioned with regard to motor insurance, is also important. This is a tricky aspect of insurance and is not particularly profitable, but if a company has been operating for, say, five years, in general accident and other aspects, it should be capable of running a motor department. I believe that it is wrong for a company to start off in motor insurance, which is about the most difficult and treacherous insurance activity. It should have previous experience in another insurance activity.

Mr. Darling: I intervene only to tell the hon. Gentleman that we have examined all of these questions and there are difficulties. Let me explain one. The five-year period is something that we might put into the Bill, but what about a new insurance company employing people who have had over 21 years' experience? Should they be rubbed out?

Mr. Temple: I am not claiming that to put in all of these provisions will be simple. That is the task of the Government draftsmen who I am confident, if the Minister of State agrees with me, could import these provisions into the Bill. I regard all this as having the highest priority; insurance should be watertight and strong and we must have solvent insurance companies.
On this Bill I feel that the Government have gone some way towards improving insurance legislation but they have missed a certain number of opportunities. They have delved into rather petty matters such as the listing of charitable and political subscriptions. I call those paltry and petty matters. But they have left out protection for unit trust holders, and, in my opinion, they have not gone far enough to protect the interests of those who seek to be insured. With those criticisms I give this Bill a fair wind, and I hope that its Committee stage will be concluded long before the Christmas Recess.

7.20 p.m.

Mr. Norman Atkinson: I begin by going back to the speech made by the right hon. Gentleman the Member for Altrincham and Sale (Mr. Barber). In the closing stages of his speech he referred to the words of Leslie Cannon, the President of the Electrical Trades Union. He compared Leslie Cannon's words with some things said by the Lord Chancellor in another place. I want to put on record that there is no one in the trade union movement who has advocated any representation of trade unionists, by law, on the board of directors of any company. This is the case, and it is wrong for the right hon. Member to suggest otherwise. The Lord Chancellor was referring to workpeople, employees of a company, and he went on to wonder whether they should be represented on the board of directors. This


is another matter and one which I hope will be debated throughout the whole of the Labour movement.
I want to deal with some of the private politics of the Bill and to make some comments from the point of view of an active trade unionist who has taken part in discussions throughout our movement about the future of company law and how we as a movement see the future rôle of the limited company. I shall perhaps do a little bit of crystal gazing about the future Bills which will make up the long series that the Government intend to introduce.
We welcome the Bill and the fact that the Government have gone far beyond the Jenkins proposals. Having said that, it is true to say that the trade union movement would be critical of many of the omissions from the Bill. The Bill needs some bone, and we hope that during Committee there will be Amendments tabled to inject a firmer spirit into some of its provisions. I regret that we have had no outline from the President of the Board of Trade about the way in which the Government are thinking of future legislation.
If we look at this Bill in its true perspective, it must be related to the intended legislation which this or subsequent Governments are to bring in so that we can reach the kind of political objectives that we set out to achieve. That is assuming that we get a continuity of Labour Government to provide the second, third and fourth stages of the process begun in this Bill. We need much more radical reforms in company law than is currently envisaged. We are moving into a very technologically advanced, sophisticated and professionally managed society. This means that the rôle of the limited company will be different from its rôle of today.
I hope that my right hon. Friend the Leader of the House, who elsewhere has been put in charge of a group of people undertaking research into the formulation of ideas about the future rôle of the private company, will bear this in mind when considering the kind of mixed economy which is envisaged during the next few years. Many of us have discussed our ideas with young people who

are politically enlightened and who have a contribution to make. We have spoken to people aged about 20 to 30 with some ideas about their future, at trade union schools and political discussions. If we think of these people who will be coming up for retirement in about the year 2000, it is interesting to analyse some of their views about the private sector of our economy.
The remaining 33 years of this century is not a long time for the reform of company law. The President of the Board of Trade pointed out that we have been in the habit of reforming our company law, in the last century and this century, in 20-year cycles. I accept that the rapidity with which our society is now changing under the leadership of a Labour Government will result in many more reform Bills of this kind being introduced and at much more frequent intervals than in the past.
We should relate the provisions of this Bill to the lengthy period which they are intended to cover. Most of us agree, when we talk to young people about the kind of society they envisage, that we will, in the remaining years of this century, even with a continuity of a Labour Government, be unable to eliminate unearned income. We will still have a mixed economy; we may not be able to establish a Socialist society. What we are saying in the Bill relates to the kind of ideas which the leader of the House must consider when dealing with the kind of legislation to be brought before the House in these 33 years.
We all recognise that there is no instant Socialism and that this is a very slow process. It is important that we should get our priorities right. It is important to examine the proposals in this Bill to see whether they are the best possible to help us along the road that we intend to take. There is the question of the character of private investment, how we see the rôle of future shareholders, and how we should make provision and introduce changes in our law which will democratise the rôle of the shareholder and the rôle of the company relevant to shareholders.
We are not very far away, when we talk in terms of 13 years ahead, of the sort of changes that will take place in that period, and how they will affect


the reforming zeal of this Government in terms of company law. By 1980 we shall see almost a complete abolition of the present investment system and with it, of course, the Stock Exchange. The main idea which has been developed inside the Labour movement to replace that system, which could broadly be described as investment collectives, will be the main basis of company investment in the not too distant future. Investment collectives will be an amalgam of the kind of group investment we see at the moment. That is one of the major things likely to emerge in the future as a result of our political thinking.
Reference was made to unit trusts, savings groups, pension funds and other methods which are at the moment the basis of collective investment. The unit trust movement will develop very rapidly and within a few years will take on quite a different character. We can see the embryonic change taking place in our ideas on investment. It is from that kind of embryo that will emerge this thing called "investment collectives". We see these changes in our kind of mixed economy, and we should carefully examine the Bill to see whether it fits into that process.
The Lord Chancellor was perfectly entitled in another place to make the comments he did about the changing political scene and about how the Government intended to set about bringing in a series of reforming company law Bills to ensure that those changes take place at an organised rate.
Looking back over the post-war years, it has taken about 20 years to expand the public sector of our economy, from something like 5 or 6 per cent. to 22 or 23 per cent., which is now publicly owned or, if I might put it, democratically controlled by State investment. There is a tremendous job to be done in order to double the size of the public sector of our economy and to achieve the kind of mixed arrangement which we will see emerge in the next 20 years.
My hon. Friends mentioned insurance and banking in connection with the Bill, but they omitted to mention that the public ownership of banking and insurance is Labour Party policy. The Government are committed to carrying out the nationalisation of insurance.

Mr. Speaker: Order. The hon. Member is just a little wide. He must get back to the Bill.

Mr. Atkinson: The President of the Board of Trade gave a personal invitation for us to develop some of our own ideas about the future. I have scrapped some of my notes about the technicalities of the Bill, but my right hon. Friend was anxious to learn from back benchers what they were thinking, not on this Bill, but on the second and third Bills which he intends to introduce.

Mr. Speaker: Order. The hon. Member will be able to gratify his right hon. Friend's anxiety but not in this debate.

Mr. Atkinson: I appreciate that, Mr. Speaker. The tragedy was, of course, that the President of the Board of Trade gave that inivitation during your absence. It is no doubt on record that he did offer a very wide invitation for us to take part in the debate in this way. He particularly said that he wanted suggestions and proposals about the second Bill. I am following on from the remarks that were made by the Lord Chancellor in another place. I believe that we should make some comments germane to the future function and structure of limited companies.
My final comments will be brief because, being a campaigner for shorter speeches, I do not wish to be the exception to the rule. I propose to deal with the five points that were made by the right hon. Member for Altrincham and Sale in his opening remarks. I shall deal first with the question of the information that is to be made available by the provisions of the Bill in terms of greater worker participation on company boards.
The situation that arose in Vickers' Walker yards in Newcastle this week, where practically the whole of the labour force threatened to resign because of lack of information and security about the future, could have been avoided had the provisions which are now contained in the Bill been available.
Referring to the question of exempted companies, there are, in our opinion, too many such companies, even with the provisions of the Bill. The trade unions cannot see why even the smallest unit should not be included within the provisions. There is no necessity at the moment to have these massive exemptions.
Comment was made about higher executives. One thing that worries a lot of people, including myself, is that nowhere in the Bill is there reference to executives or directors' families. A dodge which is practised is this: a director has to declare his remuneration, but there is nothing to stop him from putting one or two members of his family, his wife particularly, on the pay roll for no other reason than to augment his undisclosed income. I would like to see the Bill strengthened in that respect.
The question of nominee shareholders was also raised. The trade unions are on record as having something to say about this. The whole of the trade union movement is unanimous in its declaration that nominee shareholding should be totally abolished. There should be no percentage of exclusions in this sense. The whole of nominee shareholdings should be abolished, because we see no justification in any degree for secrecy in the matter. Some people argue that it is wrong that because they have money in a company it should be declared to the world, but there is nothing to stop a person, if he is afraid of that kind of publicity, from transferring his money from a shareholding into a bank. By so doing he would have complete secrecy.
Regarding political donations, Lord Gardiner listed the total donations prior to the 1964 elections as being over £2½ million. This represents over £4,500 per constituency. Labour research has gone further than this and shows that well over £3 million was expended before the 1964 General Election on behalf of the Conservative candidates. They are, after all, only anti-democrats. Surely only myopic anti-democrats could object to any kind of daylight being brought into a situation of that kind, where that kind of money can be poured out.
Regarding insurance, I share my hon. Friends' concern about the present situation. We all recognise that no matter what is said in the Bill, if there are people who wish to exploit weaknesses in British law, whether it be company law or any other kind of law, they will do so. Even the best law has never prevented criminal action from being taken, nor has it prevented fraud. No matter what we write in the Bill, it will not stop activities of that kind.
There is, however, one thing sadly missing from the Bill, and that is provision to strengthen the Board of Trade. I understand that at the end of last year the Board of Trade were having about 18 investigations undertaken. All of them were being carried out by outsiders. The Board of Trade was incapable of carrying out the provisions of the 1948 Act. Therefore, if we are to strengthen companies legislation, surely we should have an assurance from the Government Front Bench that the staff of the Board of Trade will be extended so that it may carry out the kind of investigations envisaged.
If the argument is that the Bill is to act as an early warning system in insurance and company problems of this kind, it can do so only if the Board of Trade has sufficient people capable of carrying out immediate investigations when they believe that a problem is likely to occur. At the moment it takes about three years to carry out an investigation, and by that time the damage has been done.
I am sorry that I strayed a little from the Bill in the opening stages of my speech, but it is important that some of us put on record our long-term views about the rôle of the private company and the kind of society which we see for the future. That rests with leadership from this Government. I believe that we shall have uninterrupted leadership from this Government throughout the remaining years of this century. I look forward to tremendous changes taking place and an extension of commercial democracy in every sense. While I believe that we shall see a tremendous extension of public ownership in industry and commerce, I look forward to the day when big changes take place in the structure and function of private companies. If the object of the Government is to have continuous growth, full employment and stable prices in order to create a classless society, then we shall achieve it only when we start to interfere basically with the private company as we see it at the moment.

7.43 p.m.

Mr. Richard Wainwright: The hon. Member for Tottenham (Mr. Atkinson), in his interesting speech, alleged that one dodge being practised was that of a company director who put his wife and/or some of his children


on the payroll to dodge some of the disclosure provisions. He has forgotten the Inland Revenue. As far as I am aware, in practice, the only way in which such a "dodger" could have the amount of his wife's salary allowable to the company for Income Tax purposes would be to make her a director. By doing that he would fail to dodge the Companies Act because her remuneration would have to be disclosed. I know of no instance in which a business has succeeded in persuading the Inland Revenue to allow as a charge a wife's salary for just being about the place with no function and no work to perform. To pay tax on it at present rates would be a very expensive way of dodging the Companies Act.
The hon. Gentleman's remarks brought to the forefront of my mind the position of the Inland Revenue in respect of this Bill. With the advantage of the presence of the Chief Secretary to the Treasury, I should like to ask to what extent the Inland Revenue is behind the Bill. It was said quite frequently in another place that the provisions of the Bill about exempt private companies were necessary because of the scandalously large number of exempt private companies which were not keeping proper accounts or which were not fulfilling their accounting obligations.
I find it extremely difficult to believe that the Inland Revenue has tolerated a situation in which a large number of companies are either not keeping accounts or keeping them very badly. That has not been my experience with the Inland Revenue. The House should know to what extent the Inland Revenue has inspired or assented to some of the provisions for extra disclosure of information outside the accounts, in the directors' reports. Is the proposal to disclose turnover related to the possibility of a turnover tax? It would be of interest to know whether that is behind some of the Bill's provisions.
I have always believed, from some little experience, that the Companies Act, 1948, although now in need of some amendment, was a splendid achievement of the 1945–50 Parliament and therefore a great credit to the post-war Labour Government. Compared with the solid timber of the 1948 Act, this Bill, especially if it is to be shorn of the good done to it in

another place, is the merest flotsam, and, I am afraid, flotsam which may sink some small businesses and specialised exporters.
What makes the Bill particularly discreditable to me is the humbug with which some of the onerous new provisions are alleged to be linked to what is called the privilege of limited liability. I cannot see how the splendid device of limited liability, which has been operating for nearly a century, can suddenly be prayed in aid of an obligation to disclose a whole lot of information for the first time, as if limited liability were a new invention of Socialism which has just recently been bestowed on a grateful British trading public.
It also seems to me humbug because if there is any purpose in the requirement about the disclosure of turnover, exports, the age of the directors' grandmothers, and so on, it must be for the better economic management of the country, for which I can see a case for disclosure. It is nothing to do with whether the economic unit happens to be of limited liability or whether it is quoted on the Stock Exchange. The other place slipped up in that respect. If we want to consider the place of the glass industry in the economy, for instance, it is no good talking about getting information from quoted companies because, as we all know, Pilkingtons, the leaders of the industry, have never been, and probably for some time will not be, quoted.
If we want information about commercial professions it is no good tying it to limited liability. We are wanting information from what are unincorporated partnerships. I hope that during the stages of the Bill we shall be freed from the humbug of the claim that this is something to do with the privilege of being quoted or being limited and that we shall have a frank admission that what the Government want—and there is a good case for this—is information from the leading units of every economic occupation.
The Bill is presented, in somewhat lugubrious tones, as an interim Measure. I can see two justifications for interim legislation. The first is that something is required in relation to the condition of Parliament, some constitutional issue which happens to involve limited companies and their affairs. This I conceive


to be the case with the proposal for the disclosure of political contributions. The Liberal Party, as must be known by now, takes no exception to the relevant Clause or its urgency as an interim measure. If it does anything, we think that it will do good.
The second, and only other, reason I can think of for an interim measure is to protect the public from widespread and menacing fraud. This justifies the insurance company part of the Bill and, equally, should justify some clauses, which, alas, are missing from the Bill, for strengthening the powers, and certainly a long overdue strengthening of the practice, of the Board of Trade in relation to other company frauds.
I wish that the Bill had shown traces that the Board of Trade had been talking, after the report had been published, to the two inspectors who did the Cadco job, who would have plenty to say about the deficiencies of the law concerning a barefaced scandal of that kind which did so much damage to innocent people. I wish that the Board of Trade had listened to the chambers of commerce, who are positively enthusiastic for measures to promote decent trade and track down much more effectively, and much quicker, the occasional rogue.
Instead of those urgent measures against fraud, we have the largest and what is admitted on all sides to be the most significant section of the Bill requiring much more disclosure from companies, and especially from exempt private companies. While I am in sympathy with the idea of a certain amount of additional disclosure, I cannot see any justification for including this in an interim and allegedly urgent Measure.

Mr. Stainton: Would not the hon. Member agree that the field of the exempt private company is the breeding ground of the long-term fraud? If the hon. Member were to go to New Scotland Yard and talk to the Fraud Squad, he would find that this was predominantly true of the smaller company frauds.

Mr. Wainwright: I am glad that that intervention contained the word "smaller". While I do not deny that there is fraud in the sphere of the small private company—it would be odd if there were not among 400,000 such bodies—nevertheless it is no more than the

smaller type of fraud. I would not have thought there would be objection to measures involving the exempt private companies if they were part of a Bill designed specifically to deal with important fraud of all types in relation to companies. That, however, is not the case.
That was brought out particularly offensively in another place, when those who pleaded, I believe rightly, for the Government to be willing to include provision for no par value shares were told that this was an almost impudent claim because the Government wanted all the time they could have to pursue this disclosure provision for exempt private companies—indeed, to abolish the exempt private company status altogether. Why something that the Jenkins Committee rejected should be put into what is alleged to be an urgent Bill, while something which the Gedge Committee as long ago as 1953 unanimously recommended—namely, the introduction of no par value shares—should be omitted, I cannot imagine.
The Liberal Party—not, of course, alone—followed up the recommendations of the Gedge Committee with a specific plea—I quote now from a Liberal document called "Own as you earn"—
for permission to treat an Ordinary Share for what it really is, namely, ownership of a fraction of the company.
The reason for that plea was mainly to promote employee shareholding and to make the whole business of shareholding much more rational and comprehensible to wage earners.

Mr. Stan Newens: The hon. Member said that the Gedge Committee unanimously recommended the introduction of no par value shares. I think I am correct in saying that the T.U.C. submitted evidence to the contrary and that Wilfred Beard made a minority report to the Gedge Committee on this subject.

Mr. Wainwright: I am grateful for that intervention. I acknowledge at once that my memory has failed me. I now realise that the T.U.C.—not, I think, to its credit—was retrograde in this regard. The hon. Member will, I think, agree that the Gedge Committee's majority recommendation was wholeheartedly in favour of no par value shares.
All that we are given to look forward to is a promise, without any date attached, of further stages of company law reform. I hope that hon. Members opposite, who have spoken eloquently about their ideas for the future of companies, will make life very uncomfortable for their Front Bench until the Government produce a much clearer idea, with dates attached, of what those future stages will mean.
If any of the ideas of the hon. Member for Tottenham or the hon. Member for Bedford (Mr. Brian Parkyn) are to be expressed in those future and indefinite stages of company law reform, there is bound to be some legal provision for the separation of very large companies from very small ones. This will be completely contrary to the whole trend of the Bill, which tries to impose on the commercial community one type of limited company.
If, however, as I hope is the case, we are to extend greatly by legislation the social obligations, obligations to employees, obligations to the whole community and especially to the local community in which the company is situated, surely we shall have to tackle the difficult job of separating the very small companies, which because of their tiny size cannot be expected to go a long way in practising widespread social obligations, from the giants which owe a very great obligation to the community which trains their workers, which provides them with orderly markets, which helps to promote their exports and all the rest. Therefore, the next stage of company law will have to go clean contrary to this stage, if it deserves the name "stage", which is now before the House.
I turn briefly to the proposals for the disclosure of information outside the accounts. It will, I think, be generally agreed that trading figures are of little use except in relation to other trading figures. The absolute figure for a company's turnover is of extremely little significance, if any, unless one relates it to the assets of the company, its stock in trade, wage bill or some other figure. One must have at least two sets of figures to make the whole exercise meaningful.
Company accounts simply are not prepared, and cannot be expected to be prepared, for the enlightenment of economists, economic managers, civil

servants or the admirable staff of "Neddy", because company accounts have to be prepared for the benefit of the proprietors. The exercise of the company accountants' judgment is for the information of those who have supplied the original funds and those who have a proprietorial interest in the business. It is for this reason that nowadays no accountant dreams of presenting to a works manager, for instance, historical accounts which have been provided simply for shareholders.
Anybody who produced to a works manager figures of stock or work in progress which had been valued for the purpose of shareholders would be told to go away and not appear again until he had learned something about accounting for management. It is, therefore, trying to get poor figures on the cheap to use the company system for the enlightenment of bodies like "Neddy".
I will weary the House with only one example of the danger to which this can lead. "Neddy" recently produced an alleged league table of the major clothing firms and tried to relate their recent earnings to the alleged value of the capital which they were employing. At first glance, it was a fascinating table, especially to anyone who has always lived in the centre of the ready-made clothing trade. But it did not take more than a moment's inspection to find that a number of companies, generally admitted to be extremely efficient firms, were low down the table for the sole reason that they had recently revalued their assets and were, therefore, working on a relatively high figure of capital employed.
I do not quarrel specifically with that exercise, because it may be that "Neddy" was anxious simply to stir the pot. I take the view that energetic companies of the size of Montague Burton, Hepworths and Alexandre are quite big enough to defend themselves, as they did straight away in the financial Press and otherwise.
The point that I wish to make is that, since the Government propose to insist upon identical disclosure by very small companies, they will themselves be making meaningless comparisons between companies which are not big enough seriously to defend themselves. If some financial journalist, or a well-meaning civil servant or Government economic adviser decides,


shall we say, to publish an investigation of the stepladder industry or the tin trade, under the provisions of the Bill he will have all the information from small and medium-sized companies available. He will collate together information which was prepared only from a shareholders' point of view and is purely historical, of mills brought in at the value at which they were bought in the year 1899, compare them with new premises bought by another company, or revalued, in 1967, and make other nonsensical comparisons of that kind. The Bill will produce information from very small companies, and the errors will not be demonstrated in the dramatic way that they were at once in the "Neddy" case, when there was a very quick come back from the public relations officers of the big clothing companies.
In short, if the Government want to be burdened with a great deal of meaningless information without economic significance, let them burden the Board of Trade with all these disclosures from a lot of very small companies. The more of that kind of work that the already overloaded Board of Trade is asked to do, the less time, energy and staff it will have at its disposal to pursue the real job of policing the Companies Acts, which, in my opinion as a practising accountant, are very inefficiently policed from time to time at the moment.
I fear very much that, by pressing the Bill in the form in which it was introduced in another place rather than the form in which it left the other place, the Government run the severe risk of so prejudicing and depressing business opinion that the next stage of their intended company law reform, whenever it comes, will itself be severely prejudiced.

8.4 p.m.

Mr. Robert Sheldon: The right hon. Member for Altrincham and Sale (Mr. Barber) asked why my right hon. Friend the President of the Board of Trade did not accept the arguments of the Jenkins Report, the arguments against the disclosure of the remunerations of directors of small companies. The arguments are contained in paragraph 351, because I can find no other arguments against it in the whole of the Report, and it will be seen that they consist of the following:

… public disclosure by some small companies might be embarrasing to them.
That is not an argument which needs rebuttal. It is an opinion, a view; and the Government, the right hon. Gentleman and I myself are entitled to take a contrary view. There is here no argument that needs counter arguments. It should be understood that whereas the Jenkins Report in so many of its conclusions proceeded from a weight of argument and understanding, in this particular case there was only a view expressed, and that view can be countered by another view.

Mr. Barber: With great respect, there was a view expressed but, in the following paragraph, the Committee made a specific recommendation that although the information concerning emoluments and turnover should be available to the members and to the debenture holders, it should not be made public. I only mentioned that because it was, after all, a specific and calculated recommendation unanimously put forward on behalf of the Committee. Therefore, the point that I was making was that we might have had during our deliberations in another place and here some explanation of why the President of the Board of Trade did not accept that recommendation which affects the directors of 300,000 companies.

Mr. Sheldon: That was not the argument put forward by the right hon. Gentleman. He argued that the Jenkins Committee proceeded to argument. Therefore, that argument needs rebuttal. If he looks at HANSARD tomorrow, he will find that he is wrong in that respect.

Mr. Barber: Mr. Barberrose——

Mr. Sheldon: No, I will not give way again. We can look at HANSARD tomorrow——

Mr. Barber: I quoted the passage to which I have just referred, as well as paragraph 351. I quoted both this afternoon. I said exactly what I have just said.

Mr. Sheldon: Paragraph 352 is no argument. It is even less of an argument than paragraph 351. I was being charitable to the right hon. Gentleman.
To return to the Bill, it is coming round a second time. Because of that, it might have tended to have the savour of recooked meat. However, during the


delay of 12 months, we have had the addition of some rather valuable Clauses. In particular, I am happy to see the Clauses about disclosure of shareholdings of directors and changes in them, and also those relating to the level of wages and salaries and numbers of employees. In addition, we are all glad to see the relevant change relating to insurance companies.
I must show a little disappointment in that non-voting shares have not been included for legislative change. That is rather a pity because that is a great abuse which ought to be corrected.
The second Bill which is promised to us probably in the lifetime of the present Parliament will need a much wider level of discussion and debate. I myself hope that we shall have something akin to the hearings which go on in the United States.
Normally, legislation is a hurried process because it is presented to meet a particular requirement. In this case there is not the same need for speed, and I hope that we shall get the greater debate which is possible. Representations to the President of the Board of Trade are not sufficient by themselves for that purpose. We get representations made by those people with interests which are not the subject of close scrutiny. I hope that my right hon. Friend the Leader of the House applies his fertile mind to seeing whether it is possible, having such long notice of the second Bill, to initiate some form of specialist committee where it could be discussed over the next two or three years and be a model for the type of legislation particularly suited for such a committee.
With these matters we could discuss the question of the separation between the advisory functions necessary to any board and the executive function, together with the relationship between the two which is of great importance; also the rôle of the employees in the company, at what level they should be represented, what sort of function and what sort of powers, if any, they should have. Greater disclosure I expect to see as a continuing process built on an acceptance of the disclosures provided in this Bill. I look forward to having these further arguments. The responsibilities, which my

hon. Friend the Member for Bedford (Mr. Brian Parkyn) mentioned, to employees, to shareholders, to the suppliers, to the community and to the nation can also be discussed. It is in this way that we can get full probing and can provide the framework for future legislation.
Last February, when we reached the Second Reading of the other Bill, I said that disclosure, which was the essence of it—and it is an important part of this one—resulted in a happy alliance between those who wished to protect the investors, and those who wanted disclosure for the benefit of economic efficiency, and I hope that this happy alliance between those two kinds of people pursuing similar ends for only slightly different purposes will continue throughout the Committee stage and after of this Bill.
It is necessary that much more be known about the individual firm in future so that comparisons can more usefully be made. I think that the disclosure provided for in this Bill will enable more relevant information to be obtained by those investing, as well as by those who have the wider interests of the industry or firm at heart. Such matters as the measure of efficiency based on the return of capital, properly valued as specified in the Bill, will be one of the important results to flow from this Measure. The level of output per employee, knowing as we shall do the wages, salaries, and the number of employees, is another measure of efficiency which will be produced because of the Bill. We might even hope to be able to make some assessment of the marginal return on new investment, which is crucial in making investment decisions.
These are three spheres in which an informed outsider or an informed shareholder will be able to come to some decision about the efficiency and profitability of the firm in which he is directly concerned. These are some of the results which I hope to see from the Bill.
We as a nation are extremely coy about the level of our personal remuneration, but when we examine this it is not obvious why this should necessarily be so. Civil servants, the heads of nationalised industries, Ministers and Members of Parliament, have their emoluments open to scrutiny by all, and I believe that this coyness is a convention which society can break with advantage.


In Sweden they have the highest gross national product per head outside the United States, and there they practise an extreme form of disclosure. This is not necessarily proof of a connection between a high g.n.p. and the level of disclosure, but I think it is an indication that a high growth rate is not entirely consistent with secrecy. In Sweden they have an annual tax book, of about 1,500 pages, in which one can see the name of every taxpayer in the country, the amount of income that he earns in a year, and also his personal fortune.

Sir Cyril Osborne: What does that do? The hon. Gentleman will, no doubt, remember that Sweden made money out of two world wars. If he is going to make a correlation between what happens in Sweden and what happens here, perhaps he will remember that Sweden has the highest suicide rate.

Mr. Sheldon: It would be a pity if the hon. Gentleman were to try to correlate those two facts. No correlation of the other kind could be employed, because here we have an example which shows the contrary. All that I was showing was that one does not depend on the other, and the fact that Sweden has this extreme level of disclosure which does not affect the g.n.p. is a case for arguing that secrecy does not provide some of the terrible things which have been suggested. The other point which is claimed for this disclosure is that it prevents a great deal of tax avoidance because so much is known about the individual, but that is by the way.
The disclosures in this Bill are much more limited. I should like to widen Clauses 6, 7 and 8 so that each director has his remuneration disclosed, not by name, but merely the level of remuneration of each director. I think that the elaborate way in which this secrecy is to some degree preserved is quite unnecessary, and I find it difficult to accept. Although I would prefer to widen the level of disclosure, I would be very unhappy if it were narrowed.
I think that the second Bill might proceed to the widening of the amount of disclosure. Industry has come to feel, quite mistakenly, that it has absorbed a large number of changes, and it has tended to resent these. Because of this

there is a need to proceed fairly cautiously.
There are a number of reasons for disclosure, and I should like to go into them. First it is needed for the investors and for outside comment on individual companies. Company reports are much more informative now than they used to be. Even as recently as a year ago it was difficult, from reading the reports which were issued, to understand what a company manufactured. The aphorisms of the chairman ought to be open to scrutiny and if they are wrong they ought not to go unchallenged. A comparison needs to be made frequently between the efficiency and profitability of one firm compared with another in the same industry. We need a number of figures to be able to make that comparison, and it is this inquiry by those interested in the company, whether as an onlooker or as a shareholder in a number of companies, which is so important to improve the performance of companies in any particular industry.
The point has been made a number of times today that the level of remuneration of the directors of a small business is no concern of anybody else. We know that this is not true. It is of particular interest to the creditors of such companies, because these companies have certain advantages as limited liability companies. With an unlimited company, whether as a proprietor, or as a partner, a person has the whole of his personal wealth at stake, but with a limited company there is no such risk. At the present time it is disgraceful just how much credit a limited liability company is able to claim for itself when one bears in mind the amount of information available about it. The individual or firm who risks a large sum of money in supplying credit to another company about which he knows so little needs rather more protection than he receives at the moment. More information should be available about such companies because when they fail, the failure is likely to be substantial and there is little left to compensate those who are unprotected.
I am less convinced about the need to disclose exports. I think that this is of marginal value, but it may be of use in our present difficulties, when so much attention is being paid to the level of


exports by individual companies. I think that it might promote direct exports, as opposed to supplying goods for export by other companies. To me, an exporter is a person who goes overseas to find markets for himself. The person who supplies goods to another company which exports them is not an exporter. A person engaged in such a business is a supplier of goods. The goods may go to the home market one week, and go abroad the next. He is not an exporter. It is the direct exporter about whom we are particularly concerned at the moment. This provision is of some marginal value at the moment because of our difficulties, but I think that it may become rather less important in the years ahead, and this is what we should be considering in a long-term Bill of this kind.
The need for disclosure for Government economic planning is obvious, and a number of hon. Members have drawn attention to this. The hon. Member for Colne Valley (Mr. Richard Wainwright) disputed the need for these figures. He said that these absolute values were incorrect and inadequate. It is true that absolute values of the level of stocks may not reflect the true values of the stocks, but in economic planning we are much more concerned with changes than with absolute values. If companies report a down-turn, the extent of this down-turn can be of real significance. Although I admit that changes of values may not have quite the same significance as absolute values, they are necessary, and will lead to an improvement in our statistical information from which the Government can make useful decisions.
There has been talk about lifting the veils of secrecy, and a great deal of uneasiness has been caused at the thought of the changes ahead. This, however, is one of the changes with which people will learn to live quite easily. In a year or so the fuss will die down and people will regard it as normal for this information to be generally obtainable for the benefit of people and organisations dealing with companies.
I welcome the Bill. There are some things that I hope to see in it before it gets through Committee, but it has gone a good way towards achieving some of the aims we had when we talked about the introduction of the last Companies Bill. For this we should be grateful.

8.21 p.m.

Mr. J. Bruce-Gardyne: It is always a privilege to follow the hon. Member for Ashton-under-Lyne (Mr. Sheldon), whose comments command our respect and, to some extent, our agreement. This evening has been no exception. I make one proviso. The hon. Member's anxiety about the position of the creditor of the private company who is unable to know the amount that directors of the company are taking out of it by way of salaries could be met by excluding from the new Clause 37, introduced in another place, the exemption of these companies from their obligations under Section 196 of the principal Act. This would precisely meet the problem.
However, the President of the Board of Trade invited us to philosophise about the background of the Bill and we have had some very odd philosophies from hon. Members opposite. To my mind they have very little to do with what company legislation should be about. As my hon. Friend the Member for Harrow, Central (Mr. Grant) remarked earlier, the Bill is something of a curate's egg—a curate's egg with a difference. Parts of it are excellent, parts are indifferent and parts are bad; parts are missing and parts do not belong at all. Nevertheless, it is a considerably better meal than that which was presented to us last spring and it has been greatly improved in another place. I was, however, deeply depressed to hear the right hon. Gentleman announce that the Government intend to remove some of those improvements.
This is a highly important Measure. I do not subscribe to the view that we are likely to see another piece of company legislation in this Parliament. Unlike the hon. Member for Tottenham (Mr. Atkinson), I regard the Government as a transient and embarrassed phenomenon, and I do not think that we are likely to see them introduce another piece of legislation of this sort, which will take up a lot of time on all occasions.

Mr. Jay: Does not the hon. Gentleman mean "phantom" rather than "phenomenon"?

Mr. Bruce-Gardyne: I prefer to use the word "phenomenon". I cannot regard the right hon. Gentleman as a phantom. We can see him, alas!
This is a highly important Measure, because company legislation is essentially concerned with the relationship between the owners and the management of companies. Unlike hon. Members opposite, I regard the rôle of the shareholder in our society as vital. Shareholders form the only group in our society which is exclusively concerned with profit and profitability. Hon. Members opposite have talked about the other obligations of management—social responsibilities, and so on—but my impression is that many managements today are only too conscious of their other responsibilities, including social responsibilities and status. Profits come in, but in many cases they come a long way down the scale.
That is why it is dangerous for us to proceed with the divorce which has been going on—I do not entirely exempt my right hon. Friends when they were in power, but the process has been greatly accentuated by the present Government—between shareholders and management. It is the sheerest hypocrisy for hon. Members opposite to proclaim their belief in the profit motive when they are trying to remove the influence of the one group which is essentially concerned with profitability.
Another sad effect of this divorce between shareholders and managements is that the inclination of the misbehaving management to defraud and oppress its shareholders is greatly increased. It does not lie with hon. Members opposite to complain about any increase in the number of frauds in limited companies in recent years, to the extent to which these have been encouraged by the divorce of management from shareholders. For this reason the improvements in this Bill are definitely overdue.
I put the essential chracteristics of company legislation as three in number, in descending order of importance. The first is the movement of resources towards the most profitable companies by the disclosure of all information, enabling investors to choose where their money can be most profitably invested. That is the technique of encouraging the competent and penalising the incompetent. That is the essential national interest aspect of company legislation. I am here referring to public companies, because the same

considerations do not arise in the case of unquoted companies. Secondly, there is a need to protect shareholders from oppression by management, and, thirdly, a need to protect creditors.
I cannot see that Clause 19, dealing with exports, fits into any of these categories. Several of my hon. Friends have pointed to the dangers of this Clause, and they do not over-estimate them. I object to its invidious nature. A number of firms in my constituency produce textiles, a small part of which, no doubt, are exported direct. But a very much larger part is either exported through merchants or installed in motor cars, for instance, which are exported in thousands. The right hon. Gentleman said this afternoon that directors can say what contribution they are making indirectly to exports. But they do not and cannot know. The right hon. Gentleman is trying to make an invidious and unreasonable comparison.
The obligations which the Government seek to impose on unquoted companies go much too far. Shareholders in these companies are certainly entitled to the same information as those in public companies, but they can get it and the Bill's additional requirements are not necessary. This is why I hope that the Government will think again and accept the new Clause 37 introduced in another place, with perhaps the addition which I have mentioned with reference to Section 196 of the principal Act. There is too much pathological suspicion opposite that someone may have been getting away with something more than someone else. The Lord Chancellor said this time and again in the Second Reading debate in the other place. This is an idle and pernicious curiosity. The other side have given no justification for it.
I make a special plea for another type of curiosity, a creative and constructive one, that of the City Press and financial newspapers. I am sure that the right hon. Gentleman would agree that the financial Press has, on many occasions in the past, provided an invaluable safeguard and ally for the small shareholders. One has only to think of such unfortunate incidents as Third Mile, A.F.A., and, I might say, things like the Garda and Atlantic Assets affairs, which would never have been exposed without the work of


the City journalists, who require the maximum information on quoted companies as opposed to unquoted companies. In this respect, the Bill does not go as far as it might.
I am delighted by the information required on insider dealings and beneficial holdings of shares. But is the right hon. Gentleman satisfied that the provisions for disclosure of beneficial holdings of 10 per cent, are sufficiently watertight to deal with nominee shareholdings? I draw his attention to the Stock Exchange rules as set out in the publication "Admission of Securities to Quotation", page 98, which deals with the definition of an indirect interest through families and children and the like. This may be a happier definition than the one in the Bill. It is something which I hope the Government will look at in Committee.
I am not happy about the provision that information about insider dealings and beneficial holdings of more than 10 per cent. should be available at the registered offices of companies. There might be something to be said for having them published, for instance, in the Board of Trade Journal. I think that this is the procedure operated in the United States, by the Department of Commerce.
Valuation of assets was mentioned by the hon. Member for Colne Valley (Mr. Richard Wainwright), who made a strong case. There ought to be some provision for regular revaluation of assets if we are ever to have a meaningful estimate of return on capital employed by quoted companies. I hope that the Government will go further and follow the Stock Exchange along the way to require the publication of six-monthly statements of sales and profits——

Sir C. Osborne: Oh, no.

Mr. Bruce-Gardyne: My hon. Friend says "Oh, no", but if we are to encourage people to channel their savings and investments into the companies which can use them most efficiently, this is the sort of information which is desirable.
I am sorry that the Government have not included any provision for dealing with the procedure regarding take-over bids. The recommendations were in Jenkins and have been left aside. Particularly after the recent and unsavoury affair of the Philips bid for Pye, there was a

case for looking at the Jenkins recommendations on this matter very closely.
I was surprised at what the President of the Board of Trade said about the exemption for shipping companies. He seemed to suggest that considerations of public and national interest applied in that case although they did not apply in the case of export figures. Paragraph 415 of the Jenkins Report dismisses this argument effectively, and the right hon. Gentleman would do well to study this matter again.
There are many aspects of the Bill which I could discuss, but I do not wish to delay the House. I have made some criticisms of the Measure, but I very much welcome the provisions for disclosure of turnover—again, by quoted companies; I have all along been referring to quoted companies—and the disclosure of contributions to profits by different branches of diversified companies. I also welcome the provisions for the disclosure of insider dealings, as I have explained, and I have no great complaint about the provisions covering the disclosure of directors' and top executives' salaries. I think this will help to promote a healthy "upward mobility" which I believe we need.
We have come a long way in our company legislation from the days, 200 years ago, which produced what I have always regarded as the most splendid of all companies—that which was floated
… to carry on an Undertaking of Greater Advantage, but Nobody to Know What It Is".
This is an approach which we have wisely put behind us. The Bill goes some way along the lines we should be following. In some respects it does not go far enough, while in others it goes too far. However, I hope that we shall not kid ourselves that we are going to have another instalment of company legislation from the present Government.

8.37 p.m.

Mr. Peter Archer: This is the stage of a debate when hon. Members who succeed in catching your eye, Mr. Speaker, abandon the points which they had originally intended to discuss and which have already been fully ventilated. It is the time when one can extract the general trend from what has been said. I will


do so briefly because several hon. Members hope to contribute to the debate.
I suspect that when my right hon. Friend the President of the Board of Trade introduces his subsequent Bill he will find that he has on his hands something more controversial than he has today. Although a number of important debating points have been made, a broad measure of agreement has been expressed. But what has emerged is a fundamental difference beween the parties which, I suspect, will exemplify itself more forcefully in future discussions of this matter.
Although I will not comment on the many interesting subjects raised by the hon. Member for South Angus (Mr. Bruce-Gardyne), I was obliged to him for pointing out that what we are discussing is what company legislation should be about. I agree with the hon. Gentleman that there is a fundamental disagreement of philosophy here. He spoke of the necessity to look again at the whole question of take-over bids. Surely this is an example of accepting that those who are in control of companies should have at least one eye on what he called "social responsibilities and things like that".
The essential differences which have become crystallised in this debate can be summed up in the words of the right hon. Member for Reigate (Sir J. Vaughan-Morgan), who said that the obligation resting on company directors was to secure the higest return on assets, and the hon. Member for Harrow, Central (Mr. Grant), who said that their obligation was to maximise their company's profits. Some of my hon. Friends, on the other hand, hold what the hon. Member for South Angus called "rather odd philosophies". Unfortunately, the obligations on company directors mentioned by hon. Gentlemen opposite accurately express the present state of the law and it is singularly unfortunate that even those many boards of directors who are anxious to have a sense of responsibility, even generosity, find that they are not only entitled but compelled to adopt an attitude which is thoroughly narrow and selfish. If they seek to be generous, they have to disguise their motives by pretending that they are in

the purely narrow interests of their company members. This appears to have emerged from the decision in 1962 in the case of Park and the Daily News. Any attempt to be generous to employees involved exceeding the powers they held.
While I do not entirely accept the view of the hon. Member for Harrow, Central—who, unhappily, is not in his place at the moment—that hon. Members on this side of the House basically regard the limited liability company as an enemy, I hasten to say that I do not necessarily take the same eulogistic view of its functions as does the hon. Member. The whole history of the matter is singularly uninspiring. In 1844 an unwilling legislature, after bitter debate, conceded that groups of people who wanted to participate in commerce should be entitled to do so as corporations—which, putting it brutally, is another way of saying that they would not be held responsible individually for their collective decisions. Eleven years later there was a concession that they should be able to trade with limited liability, which is another way of saying that although their profits might be unlimited any losses they might make would have to fall, at least partly, on someone else.
Unhappily, the whole concept then ossified. The vocabulary froze, and in subsequent legislation—including, I hesitate to say, the present Bill—those concepts have been adopted. Certainly any historian of the future who seeks to obtain a picture of commerce in 1967 by looking at the legislation on the subject, including even this legislation, might get a very odd account of what goes on. His impression would be that a group of people who intended to participate in commerce get themselves incorporated Then they democratically elect their directors who faithfully carry out the policy determined on by the shareholders. They undertake activities by engaging employees, who each undertake an individual and freely negotiated contract of service. They sell their goods to the consumer at a freely negotiated price. That is their sole relationship with the remainder of the community, unless by mischance one of their drivers happens to runs down a pedestrian.
That is the conception which is still in the whole of legislation on this subject.


We welcome the invitation of my right hon. Friend to offer suggestions for future legislation and to keep within the rules of order by complaining that they have been omitted from this Bill. Without carping it is unfortunate that my right hon. Friend spoke of "reforming company law". The word "company" has on occasion rather inhibited discussion of some of the wider implications, as seen in the Jenkins Committee, when Mr. George Woodcock sought to raise the question of disclosure to employees he was courteously but firmly told that it was outside the province of company law and was to do with master and servant. Even the word "law" is likely to inhibit consideration of the wider social policies which my hon. Friend the Member for Ashfield (Mr. Marquand) attempted to introduce.
When one looks at the provisions for disclosure one finds oneself up against just these inhibiting factors. I should have thought that my hon. Friend the Member for Ashton-under-Lyne dealt fairly successfully with the objection that the obligation to disclose goes too wide because it takes in the present exempt private company which consists of the honest hard working grocer and his wife, who are concerned only with minding their own business. Not every exempt private company is necessarily represented by the hard working grocer. But I would have no objection if there were some way in which to limit the obligation which excluded those companies where disclosure might conceivably be a burden, without at the same time leaving all the loopholes for the professional escapologists who, until now, have succeeded in evading almost all the legislation which was designed to protect ordinary members of the public.
One possible way in which to deal with the objection of the right hon. Member for Altrincham and Sale (Mr. Barber), that there would be unfair competition by the big combines which operate locally, is that we might invite the big combines to offer, along with the remainder of their disclosures, an analysis based on geographical and regional concepts. This would at least put the two types of company very much on a par at local level. But if some satisfactory distinction can be hammered out in Committee, most of us on this side of the House would be satisfied.
The right hon. Gentleman's other objection was rather different. He adopted paragraph 13 of the Jenkins Report, which speaks of excluding disclosure where the work of preparing information is disproportionate to its value. I am not so sold on that objection. It is terribly easy for any company, particularly if this entails a little extra work, to arrive at the conclusion that the work of preparing the information will be disproportionate to anything which can possibly emerge from it.
I would have welcomed the obligation to disclose purely on the ground that it compels that company which does not have the information already to work it out. It is very surprising if boards of directors do not already have it. Certainly at a time when control by the shareholders is progressively vanishing, one would have thought that anything which might present a clear picture and which would be conducive to efficiency would be very much to be welcomed.
Some of us would have welcomed in Clause 14 some obligations on the auditor going rather further than the present financial obligations. Is not the time rapidly arriving when there should be an obligation to conduct an efficiency audit, quite separate and apart from the purely financial audit, which is made at the moment for the protection of people other than the doctors; should there not be an audit for the guidance of the directors?
About Clause 18 one can only say that it must be very surprising, by any standards, if shareholders are not entitled to know what is happening to what, by any legal criterion at the moment, is their own money. One's heart bleeds for the Conservative shareholder who discovers that his money is being poured by a Left-wing inclined board of directors into the funds of Transport House. One wonders whether hon. Members opposite would regard this as just a pernickety point.

Mr. McNamara: Would not my hon. Friend agree that one of the most appalling omissions from this part of the Bill is a provision for shareholders to contract out of making such contributions? Does he not look forward to the time when outside his own committee rooms there is a notice to notify shareholders that they


can contract out of levies to political party funds?

Mr. Archer: I thank my hon. Friend for that comment. Certainly the proposed restrictions on companies are not within 100 miles of the present restrictions on trade unions. If a trade union wishes to make contributions for political purposes, it is compelled to maintain a quite separate fund. I would have thought that there might even be a case for requiring that shareholders must be invited to contract in, but it would certainly be interesting to see what the results of contracting out might mean.
There are obligations which go very much further than the obligation to shareholders and creditors. Much has been said about the obligation to employees, and I will not retread the same ground. But is it not incredible that someone who picked up a bundle of shares last week, and could not even now say what the company makes, should in law be a member, whereas an employee who has devoted 50 years of his life exclusively to the purposes of the company—which most of the directors have not done—will qualify for nothing more elaborate than the right to a gold watch?
In the circumstances, could not something be done to recognise that there is a status more than the purely subordinate status at present afforded to employees? Obviously, there would be difficulties in abolishing the chain of command on the workshop floor, and no one seriously suggests that. There are difficulties also because there is not one homogeneous interest applicable to all employees. For example, there is a difference between the labourer engaged two or three weeks ago and the highly paid executive who is expecting shortly to be invited to take his place on the board. But it should not be impossible to work out a method by which some control over the general policy of the company, not over its day-to-day activities, could be put in the hands of people who are, when all is said and done, largely responsible for the prosperity of the company.
One thinks, perhaps, of the issue of some kind of shares, with or without a capital value and with or without a right to dividend, but with voting rights. This might, possibly, be a way of solving the problem. However, if that is going too

far, one still wonders whether it would be possible to include a number of measures calculated to protect employees in a way in which they are certainly not protected at present.
To take a Committee point—I promise that this will be the only one—I am disappointed at the omission from the Bill of any provision to amend Section 319 of the 1948 Act. The present position, as I understand it, is that the people whose financial interests are most closely wrapped up with the prosperity of a company, the people whose interests above all are shattered if the company fails, are protected only to the extent of four months' wages or salary or £200. This was the provision in 1948, and since that time, wherever the blame may lie, there have unhappily, been considerable changes in the value of money. I hope that this matter can be looked at in Committee.
Now, the interest of the consumer. Why should not the consumer be entitled to know whether the price charged for an article fairly reflects the prosperity of the company, the costs of production and the proportion of the profits which goes into the pockets of directors? These are relevant questions when the consumer considers the price which he ought to pay for the article.
A great deal has been said about the protection of the consumer in the insurance business, and I am delighted to know that even right hon. and hon. Members opposite are much concerned about this aspect of consumer protection. Why not consumers of other commodities? There are in existence already a good many consumer associations. The Board of Trade is hopelessly overburdened. The limiting factor on Board of Trade investigations into company frauds will not be the Department's legal powers, but the resources at its command. Could not some function be found for private consumer associations which, without introducing further powers in the hands of the Government, could be given the opportunity to investigate a company's affairs from the point of view of the consumer? There we have it—an obligation to shareholders, creditors, potential investors, employees, consumers, and the public at large. But what that raises is the question whether our present concept of a limited liability company, a private corporation,


is wide enough to do justice to all those obligations.
Whatever the final outcome of the discussions on those subjects, one hopes that the subsequent legislation will ensure that the protection at present given is only proportional to the function carried out.

8.55 p.m.

Mr. John Smith: I am glad that I have caught your eye, Mr. Deputy Speaker, because there are undoubtedly more companies in my constituency than in any other, and the whole of my working life has been spent with companies.
Apart from a few blemishes and omissions, the Bill improves the legal framework within which companies work, and it will therefore improve the public reputation of companies in general. The hon. Member for Rowley Regis and Tipton (Mr. Archer), to whose constituency I have made many visits by boat, spoke about the trade unions. It is said that the Government are prepared to render this service to companies but are not prepared to render the same service to trade unions by giving them a similarly legal framework within which they could work and be free, instead of frozen, and which would improve their reputation with the public.
The principal criticism of the Bill is that it imposes on all companies provisions some of which are reasonable enough for large public companies but all of which are unreasonable when applied to smaller ones. That is particularly true of the disclosure provisions which, we should admit, are partly just pandering to the current universal urge for over-exposure of every kind, physical, financial and statistical and partly a reflection of the Government view, oft expressed, and damaging to the economy, that companies are basically wicked things, and that if one wants to enjoy the supposed advantages of being a company one must be tormented a little. That view came out very clearly last Friday.
In fact, the idea of limited liability, which, if it was not the launching pad of the industrial revolution, was most certainly its second stage rocket, is far from being a privilege. It is a service to the community, and that is why it

was introduced. The notion that the savings of aunts, widows and cousins should be denied to industry because they would have to go into the thing down to the buttons of their boots and take a personal interest in the business, is absurd and was dismissed before the middle of the 19th century. The idea of limited liability, to put it at its very lowest, has produced an enormous reservoir of taxable capacity for us to squander here.
Some of the disclosure provisions will have very unexpected results. We have already discussed the effect of disclosing turnover on large and small companies. I repeat the point that although it is possible to calculate the turnover of a company roughly, in some cases, from its annual accounts, yet if one knows the turnover of a small company perfectly accurately and does business with it, one can tell to what extent it is dependent on one's larger company. There have been many cases of a large firm egging on a small company until it is its principal customer, and then confronting the small company with absorption or extinction. This Bill will undoubtedly encourage the unscrupulous in that direction.

Mr. Barnett: Surely there is no difference between the present situation and what will apply under the Bill. The hon. Gentleman has not explained in what way it would be different. He agrees that this information as to turnover would be available generally anyway. In what way, therefore, would the situation be different?

Mr. Smith: It is not always possible to calculate turnover; but we cannot go into this aspect now. One can calculate accurately turnover of a company making a simple product like a brick, but many companies have diverse activities. In any case, there is inertia in human affairs, and people are more likely to go for this type of operation if the information is handed to them on a plate.
The Bill is also designed through disclosure to reduce the earnings of directors and highly-paid employees. It will have the opposite effect. As has been pointed out, there is at present an enormous variation in the earnings of directors. I know that from my own experience. Many firms, when these figures are


published, will be obliged to increase the earnings of their principal people if they want to keep them.
The management selection firms whose job it is to hunt about for people to fill the top positions will find it much easier than before to spot the underpaid men who are likely to respond to the offer of a better paid job elsewhere—and those management selection firms will not be Engish, but American or European. Anyone in doubt about the dangers should read the advertisements in the local Derby newspapers—Derby is a centre of the aircraft engine industry—and see who advertises and for what.
To publish the amount of earnings waived is particularly ridiculous. This provision made me inquire for the first time what I waive. I was profoundly surprised by the amount, and if the Bill is to force this figure to be published I might as well take the money instead.
As for subscriptions, both political and charitable, I have always found that boards prefer to make fewer rather than more subscriptions. I shall not go into the merits of companies subscribing at all. I do in fact think that subscribing to charity through a company is rather a bloodless way of giving alms and I prefer causes supported by the shillings of the multitude. They are more fun to run and one gets much more satisfaction from the support of all these people. But taking the situation as it is, the attitude of any board is usually, "I suppose we shall have to subscribe to this in case it gets out that we haven't". If subscriptions are to be published, it is far from certain which will increase and which will diminish.
The provisions about export figures are irrelevant, and one of the most important illustrations of this is that many firms are not exporters but are import avoiders by manufacturing here something that we must have, which is not a luxury nor even dispensable—something like aircraft engines, for example. If we did not make them, they would have to be imported. I urge that the disclosure provisions should be reviewed and that, in any case, they should not be made applicable to smaller companies.
One of the points which have not been made, although instances of it have been

mentioned quite often, is that the Bill further erodes the rule of law. Whether a company is or is not a bank is now to be decided, without right of appeal, not by the courts but by the right hon. Member for Battersea, North (Mr. Jay). In the past the courts have made some very odd decisions under this head, but we would be better employed here in improving the law so that the courts can interpret it instead of trying to do the job ourselves.
The issue of no par value shares has been dismissed on the grounds that this Bill is to do with disclosure and protection, but no par value shares are very much to do with protection. Not only do they do away with a great deal of clerical drudgery, but shares of nominal value can mislead the simple in the same way as insurance misleads the simple. They are bound to think that a £1 share is worth more than a 5s. share, and that the share paying a dividend of 20 per cent. is better than a share paying 5 per cent. On the score of protection of the innocent, no par value shares have a claim to be included in the Bill.
I urge the Government to leave that provision in the Bill. There are other measures of protection with which I will not deal, as we must get on. This Bill will improve companies. It is a very reasonable effort for a Government and party who, with honourable exceptions, some present, do not like or understand money or companies. But it may still be greatly improved even at this late hour, if we can remove from it some of the spite and the cant.

9.8 p.m.

Mr. F. V. Corfield: My right hon. Friend the Member for Altrincham and Sale (Mr. Barber), has made it clear that there is no dispute between us that it is very desirable that we should take a further look at the provisions of company legislation. He and my hon. Friends have also argued cogently against going beyond Jenkins in relation to the disclosures demanded of small companies which are at present exempt. With the smaller companies, at any rate, there has been a degree of sympathy demonstrated from the other side.
My right hon. Friend went on to express our disappointment that the Government appeared to be determined to


use their majority to expunge the very considerable improvements to the Bill inserted in another place. I am particularly thinking, although not exclusively, of the Clause providing for shares of no par value, in respect of which I would associate myself very strongly with the views of my hon. Friend the Member for Cities of London and Westminster (Mr. John Smith). I do not wish to reopen those arguments, but there remain a number of other factors. There are so many instances of thoroughly woolly drafting that one cannot but be left gravely in doubt as to whether those who instructed the draftsmen really clarified their minds and knew what they intended to achieve.
Nor can one be sure, even where one can discern the intention of the provisions, that the Bill will achieve them. Even in this Bill where certainty is very much the essence of effective legislation, I join with my hon. Friend the Member for Cities of London and Westminster in deprecating this departure from the rule of law and the Government's failure to resist their inherent urge to increase the powers of the Executive in an arbitrary manner.
I refer to Clause 12, which confers upon the Board of Trade powers to amend a Statute by Regulation, with the widest possible powers in relation to defining companies, and then makes the Board of Trade the interpreter of the Regulations which it has drawn, making it necessary, if there is any dispute at all as to what companies are covered, that the Board of Trade should be the arbitrator and there should be no appeal from its decision.
This is wholly unacceptable in any form of legislation. I agree whole-heartedly with my hon. Friend that it is our job to legislate clearly. When that legislation is delegated—and I hardly think that Regulations are the right method of doing it—it is the job of Government Departments to say what they mean and to say it clearly.
I do not, in this context, refer to Part II of the Bill. Although in Committee we shall examine with care the various discretionary powers conferred upon the Board of Trade, we recognise their need. Indeed, we welcome that part of the Bill as far as it goes.
Certainly I and most of my hon. and right hon. Friends have some reservations and share some of the doubts expressed by the hon. Member for Heywood and Royton (Mr. Barnett) as to whether they go far enough, and the doubts expressed by my hon. Friend the Member for the City of Chester (Mr. Temple). I certainly have some misgivings both as to the competence of the company branch of the Board of Trade to compete with all these extra powers and the very heavy duty which faces them, and also with regard to the facilities and skills available to the fraud squad.
I do not intend to dwell upon the omissions in the Bill. We have been promised this other Bill, which, we are told, will reflect the Government's philosophy towards limited liabiilties. I do not propose to follow into the realm of philosophy, which I leave to Members on the other side of the House. Apart from the fact that to take two bites of this cherry is to miss an opportunity, to absorb eventually much more Parliamentary time, and to postpone unnecessarily much-needed reform, it is surely time that a party which has had four years to look at the Jenkins Report, which came to the 1964 election "poised and ready for action", should be able to tell us the philosophy underlying its Bill.
But, of course, the philosophy underlying this Bill is discernible. To begin with, as we have learned from almost every major piece of legislation introduced by the Government, they have either not grasped, or they are determined to ignore, the wisdom and the basic approach of the Jenkins Committee, the principle of which is applicable to nearly all legislation, and which is set out admirably in paragraph 11 of page 3 of the Report. To save a little time, I do not wish to read the whole paragraph, but starting about halfway down. it says:
But controls and regulations carried to excess may defeat their own object; and we share the views expressed by the Greene and Cohen Committees as to the undesirability of imposing restrictions which would seriously hamper the activities of honest men in order to defeat an occasional wrongdoer, and the importance of not placing unreasonable fetters upon business which is conducted in an efficient and honest manner.
Equally, the Government seem to go out of their way to ignore the warning that,


having accepted a need for greater disclosure, it cannot follow that disclosure as such is necessarily a good in itself, or that too much disclosure can well be counter-productive. That is admirably put in paragraph 13 which was quoted earlier by my right hon. Friend.
The Government's philosophy is clearly to be found in the remarks of the Lord Chancellor in another place, which appeared to have the wholehearted support of the hon. Member for Ashfield (Mr. Marquand). When referring to provisions requiring disclosure of emoluments of directors and the more highly paid executives, he said:
We live in days when there is an incomes policy, and everybody's income is very interesting to everybody else. Why not?"—[OFFICIAL REPORT, House of Lords, 22 November 1966; Vol. 278, c. 131.]
I do not question that people are interested in other people's incomes, but I question very much whether it is particularly praiseworthy, let alone something which should have positive encouragement.
On the contrary, I should have thought that the greatest single problem in the formulation, let alone enforcement, of any incomes policy was the fact that people who freely negotiate contracts and are satisfied they are completely fair reject them as being fair not because the other side is reneging on its obligations or because circumstances in that employment have changed, but solely because other people who negotiated another contract between different parties and in different circumstances have done rather better. In short, this is nothing more nor less than the philosophy of envy and, apart from its unattractiveness in itself, the Government still have not the wit to see that in preaching it over the years it has become the principal obstacle to any incomes policy in the past and will remain so in the future.
Moreover, as my right hon. Friend the Member for Reigate (Sir J. Vaughan-Morgan) and my hon. Friend the Member for the Cities of London and Westminster pointed out, it will not be difficult to identify the individuals falling within the salary brackets described in the Bill and thereby providing management accountants, or whatever they are called—"head hunters" I believe they are called in the slang—with a ready-made directory from

which they can identify the individuals to whom the salaries they are prepared to offer are likely to be attractive.
No doubt there may be much to be said for greater competition for the exceptional skills and ability, but I cannot think that the impetus which the Bill is likely to give will be anything but inflationary or that there will not be many instances in which the effect will merely be to unsettle staffs and undermine loyalties. Nor can I have any confidence that it will not be American business men who will be the main beneficiaries of these provisions. If, as I thought was suggested by the hon. Member for Ashfield, when these figures emerge steps are taken to lower them, the brain drain, which is already a considerable flow, will become a positive torrent. If that is what right hon. and hon. Members opposite want, they seem to me to be going the right way about it in the Bill.
The same philosophy underlies remarks made by members of the Government about the provisions for the disclosure of political and charitable contributions. We all know them. The Minister of Power:
If firms want to get involved in politics they must do so with the knowledge that some of us are determined to hit back where it hurts.
The Minister of Technology:
Just as Government contractors are disqualified from election to Parliament they should also be prohibited from making direct or indirect contributions to any Party funds".
The Prime Minister:
We have made it clear that these directors will be called to account".
Nobody can say that this is unalloyed concern with the good of company law. As The Times put it,
The bit about political contributions of course is vengeful, the bit about directors' fees is envious and the bit about export earnings invidious".
If we can agree, which I hope we can, that disclosure is not good in itself, there must be some test by which to judge the value of any disclosure. The first test which I suggest is to test it against the principles set out in paragraphs 11 and 13 on page 3 of the Jenkins Report. Secondly, if there is a criticism of the Jenkins Committee, it is that it was mainly composed of people experienced in the affairs and problems of very large companies. Therefore, if there was a bias,


it was towards looking at company law in terms of the large companies rather than in relation to the very large preponderance in numbers of small companies. Even with that reservation concerning the Jenkins Committee, its Report clearly recognised that some information which was required in the accounts, while of interest to the members, was not of prime importance to the creditors and that its public disclosure by small companies might be embarrassing.
We should bear that in mind. The onus is still on the Government to tell us why they have departed from that view, which is not merely the view arrived at from the arguments recorded in the Report but is the view which was arrived at after hearing a good deal of oral evidence and reading a good deal of written evidence.
I suggest, however, a second test. The courts have often said that the smaller companies are, in effect, incorporated partnerships. To equate them with large public companies, to which in many respects quite different considerations apply, may have exactly the opposite effect to that which is intended. Although these are fairly complex matters appropriate more to the Committee stage, the lesson surely is that if a rule of company law is wholly inappropriate to a partnership, the question to be asked before applying it to a private, unquoted company must surely be whether it becomes relevant as a corollary to the privilege—we all admit it as a privilege—of limited liability. If the answer is still in the negative, I suggest that there have to be cogent reasons for insisting upon its disclosure.
I add, however, one further test. Would the disclosure nevertheless materially stimulate desirable competition? I say "desirable" because I cannot see that it is at all desirable to stimulate the competition of our foreign competitors. That, however, would seem to be the only likely effect in many cases of the provisions of Clause 19.

Mr. Darling: I take it, therefore, that the hon. Member is opposed to our going into the Common Market?

Mr. Corfield: Not in the least, but I see no reason to present to our foreign competitors the information which would make them better competitors when we

are trying to put our balance of payments right. I cannot see the relevance of the Minister of State's intervention.
Obviously, desirable competition can only be fair competition. I cannot accept that there is anything fair in the example given by my right hon. Friend the Member for Altrincham and Sale of the small company having to disclose matters which may be of immense value to the branch of the chain store next door. Nor can I accept—and I have some experience in valuation—the suggestion of the hon. Member for Heywood and Royton that assessment can be made by a valuer with no access to the books or other records of the firm concerned.

Mr. Barnett: I was saying as regards wholesalers and manufacturers—and I take it that the hon. Member agrees that the balance sheet should be published—that the stock and debtors figure would be available and that from this it would be possible to ascertain a reasonable estimate of the turnover.

Mr. Corfield: I must have misunderstood the hon. Member. If I did, I apologise.
There is nothing whatever to be said for giving this information on a plate. I agree entirely with my hon. Friend the Member for the Cities of London and Westminster that the mere fact that it is on a plate merely encourages rather than otherwise. I do not believe, as my hon. Friend pointed out, that in many firms this is a possible operation without access to more of the information than would be disclosed if our proposals were accepted.
Most of us would agree that the way to compete is by price and service. Even where we may not be worried about competition with the branch of a chain store, in itself there is not much to be said for forcing companies of that sort to make information available to wealthier competitors who are in a position temporarily to undercut with the object, not of maintaining competition, but eventually of eliminating it.
Again, regard must be had to the value of the information in relation to the burden of providing it, and the diversion of energy from productive enterprise to unremunerative form-filling. It may be true that much of the information is available anyhow, but it takes no account of


the work of compiling it in the form required or the immense labours which apparently will be involved in Companies House. As a corollary, it must be borne in mind that, if the volume of information to be made available is excessive, the inessential is likely to obscure the essential.
There is an old saying that by far the best place to hide a pebble is on a beach. The best example of a beach in the context of this Bill is Clause 30, which provides for the keeping of registers, which will become prodigious in their length, recording all changes in interests in securities which may bring people within or take them out of what may be called the "10 per cent. rule" of Clause 29. In that connection, what is relevant is the set of rules provided in Clause 27, which defines the relevant interests both for the purposes of Clause 26 and Clause 29.
I suggest that the manner which the Government have adopted to solve this problem illustrates very well the criticisms that I have been making. I have sought the advice of people with a greater knowledge of company law than I have myself and probably greater than any Minister of the Board of Trade has. Clause 27 produces, amongst other things, the following curious results.
First, in so far as Clause 27(1) applies to a private company, by reference to Clause 26, it seems to have been forgotten that in such companies each member, including directors, frequently has a preemptive interest in all the company's shares, so that every director will always have a registrable interest in all the shares held by anyone else.
What conceivable good that disclosure can do or how it can do anything other than confuse anyone searching the register is beyond me. So also is the value of including, again for the purpose of Clause 26, which deals with private companies amongst others, persons interested in shares only as mortgagees, of which the most obvious and frequent example is that of a bank holding shares as security for an overdraft.
Secondly, the effect of Clause 27(2) appears to be that among the registrable interests will be the following: the interest of any person in an employees' pension fund in the whole portfolio of

the shares comprised in the fund; similarly, on a death intestate, each next of kin will immediately acquire interests in all the shares in the estate; so would every annuitant and life-tenant, however small the interest, under the will or other trust.
One could go on with a very long list of the sorts of interests which in no case give the director any extra power over the company, yet a person who may have a far bigger interest, including a director, will be privileged from disclosing it if it takes the form of an interest, however substantial, under a discretionary trust, or if he has an absolute sole reversion to a fund of which the only life-tenant is aged 96.
This series of Clauses, Clauses 26 to 30, provides a really striking illustration of wholly unnecessary paperwork, messy drafting, obscure purpose and a resulting complexity of those registers which makes it highly conjectural whether the information that may really be important will ever emerge.
Finally, may I dwell for a moment on Clause 19. This has nothing whatever to do with company law. Indeed, the Minister of State has admitted as much in correspondence that we have had on the subject. It really may be very harmful indeed not only to a particular company but to the national interest, and I should like to take as an example the company about which I wrote to the right hon. Gentleman, although naturally I do not wish to disclose its name or product.
This company manufactures a certain product of which by far the greater proportion—more than 80 per cent.—is exported, and again by far the greater proportion of that export element goes to a single overseas market, and a highly sophisticated one, too. It is surely obvious that the information required by Clause 19 in regard to exports, coupled with that required in relation to turnover, will provide a very good guide to foreign competitors of profit margins. But to disclose profit margins can only be an incentive to indigenous firms to set up in competition, and in the meanwhile to increase the bargaining power to existing customers. It so happens that the profit margins are large, but in this case—this is almost entirely an export


company—whatever the philosophy of the party opposite, it is entirely in the national interest that they should be so, and nothing but harm can come if this sort of thing is broadcast abroad. Even if we accept the need for this information, as some of my hon. Friends have said, it can well be supplied direct to the Board of Trade, and in confidence.
I have already referred to some of the defects in drafting, and, of course, the main problems here will be problems for the Committee, but I cannot resist a plea that we should at least try to limit the affront to our language. I suggest to the Leader of the House that instead of these fatuous morning sittings some hon. Members might sit down and see, before Bills come to this House, whether it is really necessary to have the absolutely monstrous sort of language that appears in Clause 8.
There is one other matter about which I should like to ask the right hon. Gentleman, and it is with regard to Clause 24. What on earth is the justification for making the transactions there specified criminal? These are the option transactions by directors. When all is said and done, the object is to protect the company, its members and creditors, not one of whom will be benefited by the fining of the director or his imprisonment. What is important, I suggest, is that the offending director should be fully accountable to the company for any profit that he may make as a result of a particular transaction.
Some of these transactions may be quite innocuous. Let me give one example. Let us suppose that a small company needs £10,000 in cash and a recently appointed director has this sum available but is unwilling to risk it. Would it really be wrong for some other member of the company to agree, for a nominal consideration, that if this director subscribed the £10,000 this other person would undertake to purchase the shares or debentures from him, if the director so wishes, at a certain date? If there is a consideration at all, it is criminal, if there is none, it is not. I cannot see that anybody is harmed.
I think that there is a grave omission from the Bill. It is not enough merely to ensure that the disclosures which are required are made, or indeed to ensure

that they are made in the right place where the information is assessable. It is also essential that it should be made in time to be any good. The Jenkins Committee had a good deal to say about this, but there is nothing in the Bill to get away from the idea that the filing of the annual returns and the directors' report should remain rigidly tied to the completion of audit. The result is that many large and reputable companies are not yet due to file their annual returns for 1964, simply because they are still waiting for audit.
To a large extent the purpose of this disclosure is to prevent fraud, and it is precisely in these cases where every effort will be made to cause the maximum delay. The Jenkins Committee pointed out at least one method by which this could readily be done. I suggest that however much the right hon. Gentleman may argue that some of the Jenkins recommendations should come along afterwards, it is no good putting in the Bill all these provisions concerning disclosure unless there is some provision for tightening up the time limit.
In my view this is a rather ill-thought-out Bill. Apart from the fact that it is incomplete, it is badly drafted. But because it contains good as well as bad: because, in some instances, the good is badly needed, and because, despite all our experiences in the past, we retain some minimal hopes of improving it in Committee, we shall support it.

9.36 p.m.

The Minister of State, Board of Trade (Mr. George Darling): The right hon. Member for Altrincham and Sale (Mr. Barber) surprised me by approaching the debate in a quite unnecessarily acrimonious way. I know that he always does a considerable amount of homework on such Measures as this, but on this occasion he seemed to have spent all his energies searching for party issues and then dressing up the chosen parts of the Bill for this purpose as sinister moves by the Government to undermine companies and the whole fabric of the private sector of the economy—which is sheer nonsense.
Both he and the hon. Member for Gloucestershire, South (Mr. Corfield) attributed motives to us which my right hon. Friend and I have never even


thought of. I was tempted to reply in the same party spirit, but to do so would have been most unfair to all the other hon. Members on both sides of the House, who have contributed to a very good, well-informed and, on the whole, constructive debate. I intend to reply in that spirit, with perhaps one or two partisan points in the time available.
When it fell to me to introduce the first somewhat truncated edition of the Bill, nearly a year ago, the provisions for the disclosure of political contributions aroused most controversy. As the right hon. Gentleman rightly said, I had to spend some time on that. I do not know whether it was the quality of my advocacy, the strength of my case, or the fact that very few reputable companies, big or small, are afraid to disclose their political contributions, but all this controversy has now died down. The criticisms made about the introduction of charitable contributions is somewhat misguided, because we included charitable contributions as a result of the debate on the previous Bill, in response to observations made by hon. Members opposite. In accepting their observations we are putting the matter into its right perspective.
Today's debate has brought out several other controversial features, the most important of which are, first, the degree of information which small companies should be compelled to disclose, secondly, the question whether we should retain the provision for the introduction of shares of no-par value and, thirdly, whether the provisions for stricter control of insurance companies are strict enough. Many other issues were raised, but I shall try to reply briefly to the three very important points to which I have referred and then, if there is any time left, I shall try to deal with some of the other points.
Several hon. Members complained that my right hon. Friend did not discuss the many issues involved in the numerous Jenkins recommendations which are not in the Bill. The right hon. Member for Reigate (Sir J. Vaughan-Morgan) thought that my right hon. Friend should have discussed three or four other issues. The hon. Member for the City of Chester (Mr. Temple), who has explained to me why he cannot be here, raised the question of unit trusts, and about a dozen more sug-

gestions have been picked up from Jenkins and elsewhere, so let me explain again—I do not know how many times we tried to do this—that this Bill covers only a quarter of Jenkins, the disclosure recommendations; its other proposals, and suggestions which have emerged since, will be dealt with in subsequent legislation.
I will try to explain why we have gone beyond Jenkins in various aspects of the Bill. Those hon. Members who say that we have gone too far have forgotten the general reception that the Jenkins Report received on publication. In the financial Press, in the City and elsewhere, it was described as timid and inadequate and it was said that it did not go far enough to provide a satisfactory basis for a new Companies Bill. Since the publication of the Report, there have been many further proposals from public discussion and from the Stock Exchange for the strengthening of the Jenkins recommendations.
We have accepted these criticisms and the subsequent proposals and have, where appropriate, strengthened the recommendations made in the Report. The hon. Member for Gloucestershire, South said that we have had four years to consider the Jenkins Report. This was a naive way of glossing over the fact that the previous Government had two years to consider it and did precisely nothing——

Mr. Corfield: Mr. Corfieldrose——

Mr. Darling: The hon. Member took up a considerable time.
There were no preparations. We came in to find a completely bare larder. There was nothing there at all——

Mr. Corfield: But the Government were "poised ready for action".

Mr. Darling: So far as we were concerned, the Jenkins Report was published in October, 1964, and within 15 months we had prepared the Bill and brought it before the House.
Let me deal with the case which the hon. Gentleman and others attempted to make in defence of the small companies, as he would call it. My right hon. Friend explained that in accepting the privilege of limited liability—I disagree with some views expressed opposite on this point—any company, whatever its size, must


accept obligations to tell in its published accounts how the company stands financially—not only to shareholders, but also to its creditors and its employees.
Hon. Members have argued that to publish all the information we ask for in the Bill would be damaging to some small companies. I will ignore the right hon. Gentleman's grossly exaggerated numbers and claims and say, as many others have said, that some small companies may be damaged. There is a genuine difference of opinion here. As my hon. Friend the Member for Heywood and Royton (Mr. Barnett) explained, anyone can now get hold of a good deal of information about the operations of small companies and their financial standing, even their turnover, by looking at their accounts—the kind of information which, I gather, the right hon. Gentleman wishes to conceal.
We have given a good deal of consideration to the extent of any damage to small companies if the Bill is not amended. We have genuinely tried to discover this, and our conclusions are very different from those offered by the right hon. Gentleman. Nevertheless, we have looked at the possibility of applying the de minimis rule here, but there are, as the right hon. Gentleman said, practical difficulties of definition in trying to exclude certain companies. However, our minds are not closed to this and to some other aspects of the Bill; and in Committee we shall see whether any practical proposals emerge which we have so far failed to find.
The right hon. Member for Altrincham and Sale asked me to comment on Clause 37, which he described as one of the key Clauses in the Bill. We intend to remove Clause 37 from the Measure and to make all companies subject to the provisions relating to filed accounts, full information of turnover and details of directors' remuneration. We believe that the information we require on turnover is in the interests of economic efficiency and that the information of directors' remuneration is in the interests of an incomes policy. I gather that the hon. Member for Gloucestershire, South is in favour of an incomes policy, provided that incomes are concealed.

Mr. Corfield: I did not say that.

Mr. Darling: The information may also be of value to creditors and employees, as I have explained.
Some hon. Gentlemen opposite have attempted to ridicule our intention to ask for information about exports. As we see it, every company in this country which can market its goods or services overseas should be doing so. Companies engaged in overseas marketing should say so. They should say it in their published accounts, directors' reports, annual meetings and elsewhere. If they wish to export and are able to do so, they should be boasting of their achievements, just as we are boasting about the export figures today. Companies which are not in export markets, but should be, should explain why they are not exporting, and that explanation should be given in their accounts, directors' reports and so on.
If the hon. Member for Worcestershire, South (Sir G. Nabarro) were in his place I would tell him that I agree that we should try to make some arrangement for the import savings which are provided by the activities of companies; by firms which are making an indirect contribution to exports by providing the components for goods which are sold overseas. This is the sort of information for which we are asking.

Sir C. Osborne: Sir C. Osbornerose——

Mr. Darling: I cannot give way. Very little time remains for me to complete my remarks. Whatever the hon. Gentleman wishes to say, we can discuss it on another occasion. We are perfectly willing to discuss these matters in Committee and my right hon. Friend and I will explain, properly and convincingly, why this proposition should be in the Bill.
I come to the question of whether or not companies should be permitted to issue shares of no par value. Because of the shortage of time at my disposal I must discard my notes about the merits of the case and will merely mention that our decision is that we will ask the Committee to delete Clause 35 and Schedule 3. We intend to have the case, for or against no par value shares, examined and debated in the House of Commons and a decision taken by Parliament, but this must be done in the context of the wider amendments and the many recommendations for changes in company law made


by the Jenkins Committee and other bodies, as well as arising out of Board of Trade experience, and this will be presented in later legislation.
We are also concerned not to have in the Bill any provisions which may have to be amended before they can be brought into operation. Hon. Members must recognise that permission to issue no par value shares cannot be provided simply by adding a Clause to this Measure. Considerable and substantial amendments will also be needed in fiscal legislation. There will have to be changes in Income Tax, Surtax, Corporation Tax and so on. These necessary changes must be considered before we can be sure that the provisions in respect of no par value shares in company legislation are properly drafted. If, as I say, Parliament decides in favour of the introduction of no par value shares, then we intend to have the appropriate legislation, both for company law and fiscal matters, properly drafted and done as one operation. The necessary Amendments to the Finance Act will follow the changes, if the House agrees, in the later companies legislation.
If it is the wish of the House to have no par value shares, then no time will be lost in their introduction if we take Clause 35 out of the Bill. Clause 47 says that Clause 35, the no par value share Clause, will come into operation on a day which the Board of Trade may by order appoint. It must be obvious, even to the noble Lords who insisted on putting this into the Bill, that my right hon. Friend cannot introduce such an order until the Treasury is ready to make the consequential changes in fiscal law, and the Treasury time-table is the same as ours. These changes, if the House agrees, will follow on the second Bill.

Mr. Barber: The right hon. Gentleman asked for 25 minutes in which to make his speech and this is the first time he has given way to an interruption. The Minister of State, Lord Brown, said in another place that in principle, so far as he was concerned, the proposal for no par value shares was acceptable. Does the right hon. Gentleman take the same view?

Mr. Darling: My noble Friend, Lord Brown, expressed his own personal view. I shall express my personal view when

the time comes. At the moment I do not want to discuss the merits of the case because in effect this is a technical issue. There is an intriguing aspect to the campaign in another place to rush and push no par value shares into this Bill. I think it important. Two of the leaders and foremost advocates are former Presidents of the Board of Trade, and their tenures of that office fit neatly into the time-table of this controversy. It began in 1952, strangely enough in Christmas week, when the Gedge Committee was set up to look into the question of no par value shares.
The Committee's Report was published in March, 1954. Three years later Lord Eccles took over at the Board of Trade, and he was there for a couple of years and did precisely nothing about the Gedge Committee Report. He was followed by the right hon. Member for Barnet (Mr. Maudling) who also could not be bothered with the Gedge Report. He was succeeded by Lord Erroll, now a fervent advocate of no par value shares in another place, but he showed no interest at all in the Gedge Report when he was in office. He was followed by the Leader of the Opposition who was also typically disinterested.
One can understand the attitude of Lord Eccles. He is saying in effect, "You cannot expect the Tories to put this legislation into operation. You have to leave it to a Labour Government to do it." We accept the challenge, but we shall undertake this change, if the House agrees to it, in a sensible and constructive way without any undue delay. If the right hon. Member for Altrincham and Sale carries out his threat to try to stop us taking the Clause out of the Bill, for technical reasons which I shall explain in Committee, he will delay the operation which he wants to set going.
I wish to deal briefly with the insurance section. The right hon. Gentleman made a surprising statement which I think showed that he had not properly understood what we have tried to do. He said that we turned down the suggestion made by the hon. Member for Worcester (Mr. Peter Walker) last summer to help us to get an amending Bill quickly on to the Statute Book. This is incorrect. We had, in fact, started the preparation of this amending legislation before we heard anything from the hon. Member and here


it is in this Bill. We put it in this Bill because it is the quickest route to the Statute Book.
Whether our provisions are severe or drastic enough to prevent future abuses in the motor insurance world, is an issue which we are prepared to discuss with an open mind in Committee. I hope that with that assurance, hon. Members who have been pressing me to answer specific questions about this part of the Bill will agree to let us deal with the whole range of questions on this subject in Committee.
I want to refer to the future legislation which has been the subject of some speeches. As I have explained, most of Jenkins is still to come. My right hon. Friend has said that we want at some point to consider the whole philosophy of company law. That was ridiculed. The right hon. Member for Reigate was very ungenerous about this, and his comments were well below his usual standard. I can assure him that a great deal of interest is being shown in this subject among industrialists in the City, and elsewhere. They are showing an interest in the question which is here posed—whether the private sector of the economy in these days is adequately based on the old concept of the joint stock company, or whether a new type of company might be more suited to the needs of private enterprise in the second half of the 20th century. We want all this to be examined, and we want the discussions to begin.
The place of employees in company law, the content of the Lord Chancellor's observations which have been somewhat criticised, has been mentioned several times. The point is that in company law the employee does not exist. Neither in the 462 Sections and the 18 Schedules of the 1948 Act nor in the Bill is the word "employee" mentioned once. He does not exist. In company law the employee has no interest and no rights.
Many of my hon. Friends have made valuable suggestions to bring employees within company law, to have them recognised and to ensure that they are given the fullest information about the operations of the companies in which they are employed and that provision to be made so that, if they wish, they can have a genuine share in the management of

their companies. We shall look at all these ideas and many more which are coming forward. We have taken note of the suggestion of my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) that we might have a Select Committee to look into all these matters.
I was asked a number of detailed questions by hon. Members who are no longer present, and I will pass over them.
I want finally to reply to some of the questions of my hon. Friend the Member for Heywood and Royton (Mr. Barnett). He mentioned the Protection of Depositors Act and such bodies and such failures as the Davies Investment Company. We will seriously consider his proposals about advertisements. The general amending legislation which is needed is something which we would be prepared to discuss with him and to see what suggestions he has. We ourselves have some suggestions on this matter and we will see how well we can go towards getting them on the Statute Book.
Other questions have been raised with which I would like to deal when we reach the Committee stage. I am sure that, when that stage arrives, the somewhat partisan attitude which has been displayed on one or two occasions today will entirely disappear and, as has happened so often in the past with legislation of this kind introduced by the present Government, we shall have constructive proposals and will agree that it is the duty of the Committee as a whole to put this very good legislation into the best possible shape and to ensure that it makes its proper contribution to the development of the private sector of our economy.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

Orders of the Day — BUSINESS OF THE HOUSE

Ordered,
That the Proceedings of the Committee of Ways and Means, on the Local Government (Termination of Reviews) Bill and on the Export Guarantees Bill may be entered upon and proceeded with at this day's Sitting at any hour, though opposed.—[Mr. Fitch.]

Orders of the Day — COMPANIES [MONEY]

[Queen's Recommendation having been signified]

Resolved,
That, for the purposes of any Act of this Session to amend the law relating to companies, it is expedient to authorise the payment out of moneys provided by Parliament of any expenses incurred under that Act by the Board of Trade.—[Mr. Darling.]

1. That, upon the re-registration of a company under the Companies Act 1948 in pursuance of and provision included in an Act of this Session to amend the law relating to companies (hereinafter referred to as 'the new Act'), there shall—



(a) if the company is registered with limited liability and is to be re-registered as unlimited, be charged on articles lodged with the registrar of companies with the application for re-registration, a stamp duty of ten shillings; and



(b) if the company is unlimited and is to be re-registered with limited liability and a share capital, be charged on a statement of the amount of the share capital to be delivered to the registrar of companies the like ad valorem stamp duty as would be charged if the company were being registered under the Companies Act 1948 with limited liability and a share capital of that amount.



2. That, in respect of the several matters mentioned in column 1 of the Table set out below, there shall be paid to the registrar of companies the several fees specified in column 2 of that Table, or such greater fees as may be specified in regulations made by the Board of Trade.

TABLE


Matter in respect of which Fee is payable
Amount of Fee


For registration on its formation under the Companies Act 1948 of a company as one limited by shares, registration under that Act in pursuance of Part VIII thereof of a company as one so limited (not being a company in whose case the liability of the members thereof was, before registration in pursuance of that Part, limited by some other Act or by letters patent) or re-registration under the Companies Act 1948 in pursuance of the new Act of a company as one limited by shares.
If the nominal capital does not exceed £2,000, the sum of £20.



If the nominal capital exceeds £2,000 but does not exceed £5,000, the sum of £20 with the addition of £1 for each £1,000 or part of £1,000 of nominal capital in excess of £2,000.



If the nominal capital exceeds £5,000 but does not exceed £100,000, the sum of £23 with the addition of 5s. for each £1,000 or part of £1,000 of nominal capital in excess of £5,000.



If the nominal capital exceeds £100,000, the sum of £46 15s. 0d. with the addition of ls. for each £1,000 or part of £1,000 of nominal capital in excess of £100,000.


For registration on its formation under the Companies Act 1948 of a company as one not having a share capital, registration under that Act in pursuance of Part VIII thereof of a company as one limited by guarantee and not having a share capital or re-registration under that Act in pursuance of the new Act of a company as one so limited and not having a share capital.
If the number of members stated in the articles does not exceed 25, the sum of £20.



If the number of members stated in the articles exceeds 25, but does not exceed 100, the sum of £20 with the addition of £1 for each 25 members or fraction of 25 members in excess of the first25.



If the number of members stated in the articles exceeds 100 but is not stated to be unlimited the sum of £23 with the addition of 5s. for each 50 members or fraction of 50 members after the first 100.



If the number of members is stated in the articles to be unlimited, the sum of £38.


For registration on its formation under the Companies Act 1948 of a company as one limited by guarantee and having a share capital or as an unlimited one having a share capital, registration under that Act in pursuance of Part VIII thereof of a company as one so limited and having a share capital or re-registration under that Act in pursuance of the new Act of a company as one limited by guarantee and having a share capital.
The same amount as would be charged for registration if the company were limited by shares or the same amount as would be so charged if the company had not a share capital, whichever is the higher.


For re-registration of a company under the Companies Act 1948 in pursuance of the new Act as unlimited.
£5.

WAYS AND MEANS

Considered in Committee.

[Mr. SYDNEY IRVING in the Chair]

COMPANIES

Resolved,

Matter in respect of which fee is payable
Amount of Fee


For registration of an increase in the share capital of a company.
An amount equal to the difference (if any) between the amount which, were the company being registered on its formation under the Companies Act 1948, would be payable by reference to its capital as increased and the amount which, were the company being so registered, would be payable by reference to its capital immediately before the increase.


For registration of an increase in the membership of a company limited by guarantee or an unlimited company.
An amount equal to the difference (if any) between the amount which, were the company being registered on its formation under the Companies Act 1948 as a company limited by guarantee or as an unlimited company, would be payable by reference to its membership as increased and the amount which, were the company being so registered as such a company, would be payable by reference to its membership immediately before the increase.


For registration of a copy of an annual return or copies of documents delivered to the registrar of companies in compliance with section 410 of the Companies Act 1948.
£3.


For entering on the register the name of a company assumed by virtue of the passing of a special resolution by virtue of section 18(1) of the Companies Act 1948.
£10.

3. That it is expedient to authorise the payment into the Exchequer of fines imposed under any provision of the new Act.—[Mr. Darling.]

Resolution to be reported.

Report to be received Tomorrow, Committee to sit again Tomorrow.

LOCAL GOVERNMENT (TERMINATION OF REVIEWS) BILL

As amended (in the Standing Committee) considered; read the Third time and passed.

LOCAL GOVERNMENT, TEES-SIDE

10.3 p.m.

The Minister of Housing and Local Government (Mr. Anthony Greenwood): I beg to move,
That the Teesside Order, 1967, dated 18th January, 1967, a copy of which was laid before this House on 25th January, be approved.
I hope to move the adoption of this Order with reasonable brevity, concentrating on what the Order does and how it came about, and commenting on the Amendment, that the Order
be not approved until after this House has received the Report of the Royal Commission on Local Government".
tabled by the right hon. Member for Thirsk and Malton (Mr. Turton), who enjoys the respect of all of us on both sides of the House. I shall not deal with the Order Article by Article.
The Order results from proposals for the reorganisation of the local government of Tees-side made by the Local Government Commission in its Report on the North East General Review Area. The Order constitutes a new county borough, the County Borough of Teesside, which will come into full operation on 1st April next year. It will comprise the areas of the County Borough of Middlesbrough, the Boroughs of Thornaby-on-Tees, Stockton-on-Tees, and Redcar except for a small part, most of the Urban Districts of Billingham and Eston, part of the Urban District of Guisborough, a very small part of the Urban District of Saltburn and Marske-by-the-Sea, and parts of the Rural Districts of Stockton and Stokesley.
A single administration will take the place of the present mixed system, under which the present urban area of Teesside is administered by two counties, one county borough, three non-county boroughs, three urban district councils, two rural district councils and a number of parish councils. It is estimated that the new county borough will have a population of about 398,000 and a rateable value of more than £18 million.
The Order is the culmination of a long process of review by the Local Government Commission and of further inquiry by the Minister under the pro-

visions of the Local Government Act, 1958. The Commission began its review in the autumn of 1959. It consulted the local authorities and it published draft proposals in April, 1962. It held a statutory conference with the local authorities in November, 1962 and the final report was published in October, 1963. A public inquiry into the objections that had been lodged was held by the Minister's inspector in November, 1964.
After that, the Minister announced his acceptance of the recommendations on 6th October, 1965, subject to some boundary modifications. He excluded most of the Urban District of Saltburn and Marske, and extended the boundary of the county borough southwards. There was also a small extension of the boundary at Preston-on-Tees to bring within the county borough an art gallery and a museum which belonged to Stockton.
Tees-side as a whole is an area of rapid growth, both actual and potential. In the past 15 years the population has grown by 50,000, and the potentialities of the area are still not fully realised. The Commission came to the conclusion that Tees-side is now substantially a single entity—economic, physical and social—and that the present administrative structure is irrelevant to the area's needs. That was the reason for proposing a single county borough.
In its Report on the North-Eastern General Review Area, the Commission said at paragraph 95:
It therefore seemed to us necessary to ensure that the pattern of local government was such as to make the planning of development and the organisation of services fully effective, and to make certain that new development, such as houses, main roads, bridges and shops would match the growth and location of industry instead of perpetuating the patterns of the past. We were impressed by the need on Tees-side for more housing to relieve overcrowding, to replace outworn properties, and to meet the increase in population due to industrial expansion. Yet unless Teesside could be planned as a whole, it seemed to us impossible to ensure that new houses would be built in places most convenient for the people who would live in them, as it was difficult for the present ten separate housing authorities, each with their own housing list, to do other than build within or near their own boundaries.
Later, at paragraph 129 in its conclusion, the Commission said:
With the southern moorland, the coast and the river, Tees-side has a splendid setting and


it ought to be made worthy of its 400,000 inhabitants. This task requires a comprehensive plan for the whole area designed to secure the benefit of its port, its industries and its commerce, the reclamation of its marshlands, the building of new roads and bridges, the renewal of obsolete parts of the old riverside development, the designing of new centres and the provision of new amenities. This formidable task gives scope not for ten authorities to develop or redevelop ten towns but for a single authority to work out the details of the probable future growth and needs of Tees-side, and then prepare and carry out a single plan for the whole area.
It is, I think, significant that, since the proposal for Tees-side was made, a full scale survey of the area has been undertaken and is under way. After putting it to the test of public opinion, the Minister substantially endorsed the Commission's proposal and it had the full support of Middlesbrough, Stockton and Redcar, representing between them about 70 per cent. of the electors in the area.
It is only right to say that two counties will be adversely affected by the Order. One is County Durham. We have already in this House approved an Order amalgamating Hartlepool Borough with West Hartlepool County Borough. Orders for the extension of Sunderland and for a small extension of Darlington have also been laid, and, taking these Orders in conjunction with this one, Durham will still have a population of over 814,000 and a rateable value of about £22½ million.
The other county which will be adversely affected is the North Riding of Yorkshire. It will be reduced from a population of about 428,000 and a rateable value of £15·8 million to a population of 318,000 and a rateable value of £9·3 million. I have no wish to underestimate the effect of this change, but, even so, the county will still be able to support an administration which will serve it adequately and effectively, and I take this opportunity of expressing the gratitude of all of us to the two county councils for the co-operation they have given in the preparation of the Order, in spite of the adverse effects they knew it to have upon themselves.
I want to say something about election arrangements. These are set out in Articles 6, 8, 9 and 10. The new wards reflect my right hon. Friend the Home Secretary's decision after a public inquiry, and elections for the new county borough will take place on 4th May next so that there will be almost a year in

which to complete arrangements, with the assumption of full responsibility on 1st April, 1968. Article 10 cancels the elections that would otherwise have been held in May next for those authorities which cease to exist next year.
Now I shall deal with the Amendment on the Order Paper. It is, of course, at first glance an attractive argument that reorganisation on this scale should await the Report of the Royal Commission and I have basically a good deal of sympathy with it. But when it was decided to set up the Royal Commission on Local Government, it was thought right to make the most of the work which the Local Government Commission had completed, and my right hon. Friend the Lord President of the Council said in the House on 10th February last year, in referring to the work of the Local Government Commission:
The Commission has produced some valuable results within the limits open to it. …
Most of the work it has completed will be carried through. Where decisions have already been announced on proposals by the Commission, the necessary orders will be brought before Parliament as soon as possible. Other proposals on which decisions have not yet been taken will be considered on their merits, in the light of the decision to appoint a Royal Commission."—[OFFICIAL REPORT, 10th February, 1966; Vol. 724, c. 644.]
The decision broadly to accept the Local Government Commission's proposals for Teesside had been announced several months earlier, on 6th October, 1965, and this Motion represents the honouring of the firm commitment given then that the Order would be brought forward as soon as possible.
The question of Government commitments apart, there are strong practical reasons for the new county borough to be set up as soon as possible. The suggestion that this should be deferred until the report of the Royal Commission has been received can only reflect a misunderstanding, on the one hand of the urgency of the need for a united administration on Tees-side, and, on the other, of the essential processes which must follow the Royal Commission's Report. While I have every hope that the Commission's recommendations can be given speedy effect, there must still be time for consideration and consultation on issues so fundamental for the health of local government for many years to come.


After the decision has been taken on what should be done, time will be needed for the preparation and enactment of legislation and for any new authorities set up to get ready for taking over on the ground. It is impossible at this stage to estimate accurately just how long these processes will take, but it is evident that with the best will in the world, and everything going as smoothly as possible, it must be some years before the present local government structure can be replaced by a new one. Meanwhile the needs of Tees-side are pressing and the development of the area will not wait.
This is something to which both the previous Government and this one have attached the utmost importance. The House will recall the Hailsham Report of November, 1963, on regional development and growth for the North East. That Report picked out Tees-side as one of the areas fitted to support rapid economic growth and said that there could be discussion with local authorities there about the exceptional step of a planning survey of the area, to be undertaken with Exchequer assistance.
This was followed up, and early in 1964 the authorities reached agreement on the project. In mid-1965 work began on the Tees-side survey and plan, commissioned by the local authorities, acting jointly, with the Ministers of Transport and Housing and Local Government together contributing about half of the cost. The work is being carried out by consultants and consists of a comprehensive land use and transport survey and plan for the area. The consultants' report and recommendations are expected to be ready early in 1968. It is vital that as soon as these are available they should be energetically followed up. For that reason I believe that this new administrative unit, the County Borough of Tees-side, is essential.

Mr. Speaker: I have not selected the Amendment in the name of the right hon. Gentleman the Member for Thirsk and Malton (Mr. Turton).

10.18 p.m.

Mr. Michael Shaw: I thank the Minister for his very full explanation of this Order. In speaking to it and in adding my name to the Amendment I do so not in any

spirit of not wishing to look forward, because I think that we all appreciate that there have to be some very big changes in local government boundaries in the years ahead.
As the Minister so rightly says, we are faced with a period of inevitable indecision in that, since the Local Government Commission started making some of its reports, there was announced in February, 1966, the proposal to appoint a Royal Commission on Local Government in England and Wales. This is the very real problem. I will admit at once that the North Riding of Yorkshire, the county council in which my constituency lies, takes very strong exception to the Order, and has produced many arguments against it. However, for myself and for it, this is water under the bridge.
The objection has been taken—and I freely state that I raise the matter because they have put it to me—because it is felt that their interests will be seriously prejudiced by the Order going forward, because, as far as we can see, the Royal Commission on Local Government in England is likely to report early in 1968, just at the very time, in April, 1968, when this Order comes into effect. It appears, on the face of it, that there is likely to be a double bite of this cherry before the reorganisation in this important area is thoroughly digested and the area is reorganised on a basis that is acceptable for the future.
I believe this to be the real problem. I am grateful to the right hon. Gentleman for the care with which he developed the arguments on this particular point. I was glad to notice that he expressed sympathy for this point of view. However, I have learned over the years spent in this House to realise that as soon as sympathy is expressed, hope can almost at the same time go out of the other door. So, alas, it has proved in this case.
There has, I am sure, been co-operation on the part of the North Riding County Council. I make this point quite clearly, but it must not be understood that there is now agreement. Let us take some practical examples.
The Ministry of Housing and Local Government has now published its evidence to the Royal Commission on Local


Government, and presumably this evidence was submitted with the approval of the Minister. It proposed 30 to 40 major authorities covering wide areas on the basis of "city regions", the main object of which appears to be to get away from what is referred to as
straitjacket of built up areas
and to provide
elbow room and flexibility to ensure that the solution of problems of growth as yet unforeseen will not be inhibited by narrow boundaries inherited from the past".
There was no map with that evidence, but The Guardian on this occasion proved helpful by producing a map of its own, trying to interpret the ideas put forward by the Ministry.
If we look at this map dividing the country in a manner that would fit in with the submissions of the Ministry, we see that there is an area of local government covering Middlesbrough and Darlington and a wide section of country around those two areas. To the south there is a large area with its centre based at York, and another to the west with its centre based at Leeds.
If we look at that, surely it must be clear that if the recommendations of the Ministry are carried out in anything like this fashion—and I do not believe there can be large differences in interpreting their recommendations other than in the way The Guardian has done—we shall see that if the Order goes through and the recommendations of the Royal Commission are accepted, there will have to be a further large reorganisation of that area. There will thus be an interim period which will adversely affect the interests of the North Riding County Council. I have seen too often, when it is proposed to amalgamate local boroughs with others, the practical difficulties of local authorities about staffing, and so on, when their future is clearly unsure because the authority might well disappear in the next year or two.
Practical difficulties such as these will arise in this interim period. There will be a lack of confidence in this area knowing, as it must know, that the new set-up may well be altered in the next few years. I know that it is a long time since it was first mooted and, therefore, that there is great anxiety to get the Order into operation, but, since there has been this wholesale investigation by the Royal Commis-

sion, there is a strong case for taking one sure step towards the final pattern which is to last for the foreseeable future rather than cause this widespread uncertainty which is bound to occur by taking this interim measure in the full knowledge that a later and major revision must follow.

10.26 p.m.

Mr. James Tinn: I do not intend to detain the House long, but if I were not to speak on this Order I should be failing in my duty as, I believe, the only back bench Member whose constituency is considerably affected, although I recognise that there is an hon. Member opposite whose constituency is less seriously affected.
This is a decision taken as a result of a democratic procedure followed over a considerable period and after very full inquiry. While inevitably it aroused a conflict of opinion and a tremendous conflict of loyalty, it has been accepted and imaginatively and thoroughly implemented in the area directly concerned in Tees-side. I pay my tribute, which I know my right hon. Friend the Minister of Housing and Local Government will share, to the officials and members of the local authorities concerned. While understandably there was a tremendous conflict of loyalty and interest among them, with many of them seeing the prospect of a lifetime of service in their own local communities being taken from them by the creation of this larger authority, they have accepted the decision loyally.
The difficulties in the way of an amalgamation such as this do not have to be outlined. We are all only too well acquainted with local government to be aware of the sort of difficulties which arise. It is remarkable, and it reflects the greatest credit on all concerned, that these difficulties have been overcome. The area concerned is now poised on the brink of local elections for the new authority. The impression which I have gained in my constituency and on Teesside is that everyone is taken aback at even the possibility of a check being made in this process which all have accepted and have furthered in the interests of the areas a whole.
There is a particularly urgent need on Tees-side. As my right hon. Friend pointed out, this is a growing dynamic


area, in contrast to the rest of my native North Country. The increase in population in the Tees-side area is three times that of the national average, which is certainly a marked contrast with the rest of the North. This poses particular problems, making particularly and peculiarly urgent the need to strengthen the responsibilities of the local authorities in question and for the six authorities directly concerned to be reformed into a viable whole. I see no reason to suppose that this new authority, which we on Tees-side anxiously await and to which we look forward with hope and optimism, should in any way conflict with the Report of the Royal Commission.

Mr. Albert Roberts: My hon. Friend will appreciate that if the Order goes through, it is bound to have a bearing on the Royal Commission's Report. It is a case of robbing Peter to pay Paul. It is bound to have repercussions into the North and West Riding.

Mr. Tinn: The Minister specifically made the point that it will have repercussions, certainly on the North Riding. Any major—indeed, minor—step in local government reorganisation is bound to have repercussions on other local authorities, but on balance those repercussions on the existing authorities, certainly after the fullest inquiry, have to be accepted.
Without anticipating the findings of the Royal Commission, I would have thought that this step towards a new city area on the Tees, which will rank second only to Birmingham, is a step towards the regional development which many expect the Royal Commission to favour.
The people of Tees-side have cooperated vigorously and ably in making a reality of the proposals of the Local Government Commission and of the report of the Minister's inspector. It would be sad indeed if, after the local loyalties and, perhaps, prejudices have all been sunk by the people most directly concerned for the greater good of Tees-side as a whole, this House were to take a different view, as I am confident that it will not, and postpone or even negate the development which is generally welcomed in my constituency and, I believe, on Tees-side as a whole.

10.33 p.m.

Mr. Timothy Kitson: We might have had a much longer debate this evening if all right hon. and hon. Members who represent Teesside constituencies had been able to take part, but regrettably, for some reason or another, those on the Government side of the House all seem to sit on the Front Bench, with the exception of the hon. Member for Cleveland (Mr. Tinn).
I would like to say a few words on the Order because the hon. Member for Cleveland has suggested that all his constituents welcome the Order. I suggest to him that the many in his constituency who will be left in the North Riding—and there are a considerable number of them—will probably suffer quite considerably when the Order is put into operation.

Mr. Tinn: What I thought I said, and what I certainly intended to say, was that all my constituents on Tees-side, in the area delineated by the proposal, accept it. I agree that others who have been left out understandably may not share that view, but they, too, have come to accept it and, indeed, are discussing an amalgamation of the urban districts on the outskirts of the area.

Mr. Kitson: Yes, but I think that the constituents who are left out will probably suffer in some way by the very substantial reduction of the population and the rateable value of the North Riding.
I have been a member of the North Riding County Council, and part of my constituency will go into the Tees-side borough. I accept that there are probably few areas in the country which have a greater need for reorganisation at local government level than Tees-side. For that reason, I do not oppose the Order, but I agree with my hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw) that this seems to be a very inopportune time for introducing it.
The North Riding County Council will lose 25 per cent. of its population. It will lose 40 per cent. of its rateable value. On the Tees-side side of the North Riding, there will be a loss of 75 schools, 900 full-time teachers and about 1,000 part-time teachers. One extraordinary situation which will be created is that at


Cleveland Girls' Grammar School, there will be more children in attendance in September, 1967, from the North Riding than there will be from the Teesside borough. That is the sort of problem which will be created by the decision to introduce the Order before the Report of the Royal Commission is published. What worries me is that, on the south and south-west sides of the Tees-side borough, there is very little room for expansion of the borough.
I was interested in the remarks that the Minister made about the Tees-side Survey and Plan. I am sure that I speak for hon. Members on both sides of the House when I say that we all wish to see that Survey and Plan brought to a successful conclusion. It will cost the local authorities something like £380,000, and the Minister is aware of the considerable concern that we have felt on Tees-side in the last few weeks about the dismissal of the Director of the Survey some 10 months before the completion of the Plan. We all recognise the job which he has done, and we feel that it is essential for the Tees-side area that, the Plan having been produced, it should be put into operation. We hope very much that the proposed reorganisation of management will have no detrimental effect eventually on the Plan.
The reason the Amendment has been tabled is that there is a very genuine feeling that the creation of the Tees-side borough before the Royal Commission reports is putting the cart before the horse. Our argument is that, rather than face a major upheaval and the consequent disruption of services twice in a period of something like five to 10 years, which is what could happen if the Order is accepted, it would have been better to wait until the Royal Commission reported.
At the same time, I recognise that, because of the local elections which are approaching and the great necessity for the reorganisation of local government in Tees-side probably the House will have to accept the Order.

10.40 p.m.

Mr. Ted Leadbitter: I propose to deal only briefly with this Order because I have a particular desire to be associated with it.

My constituency is next door, just north of the river, and last week I had the pleasure of having the House accept the Hartlepools Order which brought a great deal of relief to my constituency.
Although we are a smaller borough, I can imagine the great amount of pleasure there will be on Tees-side where there is a greater complex of industry, of population, and of other economic and commercial undertakings which hitherto have had to depend largely on an overlapping of authorities, numbering about 12 in all. Here there is an opportunity for unity in this area, an opportunity for one authority to deal with the many problems which arise out of industrial growth and expansion.
I am satisfied—and this is the essence of brevity—that the House is in the mood to let us have the Order, but it is important, in saying the last few words on the long-drawn-out procedural requirements of the local boundary commission, to be able to say the right things.
We have here the need for a radical change in local government administration. The case for it has been made out. It is desirable, and it is accepted by the vast majority of the people. A single county borough certainly provides the best way of meeting the needs of this complex industrial area. A strong unified authority is best able to harness the energies and the resources of the area to deal with the tasks which lie ahead.
During the months ahead there will be a pertinent examination of the work and recommendations of the Tees-side Survey and Study, and it is important that the House should recognise that it is essential to implement this Order so that the new single authority, representing as it will most of the previous 12 authorities, will be able, with the expertise that it will have at hand, with the staff which it will have, and with the administrative integration which it will possess, to implement the recommendations of the Tees-side Study and Survey.
Having had the pleasure in my constituency of seeing the advantages which flow from an Order of this kind, and knowing full well that the 398,000 people in this area south of the river to be known in future as the new County Borough of Tees-side are in favour of it, I am satisfied that my experience will


be the experience in this highly important part of the country, and I wish it well.
In an exercise such as this, someone is bound to appear to lose, but I suggest to the House that any local government reorganisation must carry with it the principle that the primary consideration must be the interests of conurbations such as this, and their interests have been made out. It may be regrettable that Durham appears to lose, and that the North Riding appears to lose, but the considered calculation is that they will not lose in the manner in which they fear they will.
Unless we are bold enough to carry out this local government reorganisation in the manner recommended by the Local Boundary Commission, the country will suffer, and this Order provides the right answer for Tees-side, just as the Order approved by the House last week provides the right answer for the Hartlepools.

10.45 p.m.

Mr. Geoffrey Rhodes: For a Tyneside Member to intervene in a debate about Tees-side may be a case of fools rushing in where angels fear to tread, but this fool will be on his feet for less than two minutes. We must congratulate the Minister on bringing the Order before the House. As a Member for Tyneside, where local authorities are still divided on their future, I look with envy at the fact that the Tees-side authorities have pulled together to decide this problem.
The essence of the Amendment is simply that nothing should be done about the problem of the conurbation and the administration of Tees-side, or anything else, until the Royal Commission has not only received all its evidence but has reached its conclusions—in other words, that there should be no alteration of local government structure at all for another two, three or more years. But when the Minister appointed the Royal Commission on Local Government this was never his intention. There were some areas of the country where a decision had not yet been reached as to their future. It was clearly the Minister's intention that these areas should not be radically altered until the Royal Commission had made its recommendations.

Mr. Deputy Speaker (Mr. Sydney Irving): Order. The hon. Member is getting wide of the Order. He must relate it to Tees-side, and to no other area.

Mr. Rhodes: There were other areas of the country—and Tees-side is one—where the Minister had already announced his decisions and proposals, and it is precisely in those areas that it was intended that the Minister should proceed with the Order and bring it before the House, even before the Royal Commission had met and received its evidence. There was only one area which was in no-man's-land—Tyneside. It is precisely in Tyneside that we have been unable to reach the kind of conclusions that our friends on Teesside have been able to do. That is all I wish to say about Tyneside, except to express some regret at the fact that tonight there is no order in respect of Tyneside, too.
I congratulate our friends from Teesside in pulling together for their mutual benefit. Those who wish to amend the Order are saying that it is very bad because in solving the problems of the conurbation of local government the counties will suffer. They are bound to suffer—and they will be bound to suffer after the Royal Commission has made its recommendations, because there is no solution to the integration of transport and civic planning, and police and education administration, in these growing conurbations with between 500,000 and 1 million populations, except through a unified system of local government, and this automatically brings into the new county boroughs parts of adjoining counties. This will be so whether we have the Order tonight or wait until the Royal Commission has reached the same kind of conclusions about conurbations.
The only outcome of the deliberations of the Royal Commission is that perhaps the conurbation would be a larger area than is provided for under the Order. It would not be a benefit to county authorities; it would be even more to their detriment. There will be uncertainty on Tees-side whatever happens tonight, but the uncertainty will be less if a decision is taken tonight. I wish that Tyneside were doing the same thing as is Tees-side.

10.50 p.m.

Mr. Bob Brown: I do not agree with the assertion of my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Rhodes) that the Tyneside authorities are not agreed——

Mr. Deputy Speaker: Order. The hon. Member will remember that I ruled the other hon. Member for Newcastle-upon-Tyne out of order for discussing Tyneside. The Order relates to Tees-side, and Tees-side alone.

Mr. Brown: I bow to your Ruling, Mr. Deputy Speaker. I also want to say how lucky the people of Tees-side are to have this Order. Like my hon. Friend the Member for Newcastle-upon-Tyne, East, I envy Tees-side for the fact that this Order is going through this evening. Tees-side will forge ahead as one big conurbation, but I fear that unless my right hon. Friend makes a decision which the majority of authorities on Tyneside, with the exception of——

Mr. Deputy Speaker: Order. The hon. Member cannot relate his remarks to Tyneside; he must stick to Tees-side.

Mr. Brown: I have made the point which I wished to make. I congratulate the people of Tees-side on having this great benefit bestowed on them by the Government.

10.51 p.m.

Mr. Albert Roberts: My hon. Friends who have spoken come from north of the Tees. As a Yorkshireman, I am opposed to the Order, which is bound to affect the Royal Commission's negotiations. We are robbing Peter to pay Paul. It may mean some demands being made on the West Riding, and, as one who represents a West Riding constituency, I would favour Yorkshire being a province. I do not believe some of the patronising talk about those living on the Tees being in favour of the Order. The decisions have been made in advance of the Royal Commission Report.
I disagree with my hon. Friends on another point. This spread and sprawl from our boroughs and county boroughs has been going on for generations, and agreeing to the Order will encourage the trend. I hope that an Order will go through, but I am opposed to this one,

just as I was opposed to the Sheffield Order taking in a mining village nine miles away. It would have been better to deal with the county as a whole instead of hotch-potches here and there.
Those who have been paying tribute to the Order live in Durham and Northumberland. My sympathy goes out to the North Riding. I want to preserve all three Ridings. The only thing which I would concede would be a province of Yorkshire——

Mr. Kitson: I am also a Yorkshireman. Would not the hon. Gentleman agree that we would be better off with home rule for Yorkshire at the moment?

Mr. Deputy Speaker: Order. The Order is concerned with Tees-side, not with Yorkshire as a whole.

Mr. Roberts: I am not ashamed to speak up on this, and I am not patronising. Some of these decisions were made by the Leader of the House, when he was Minister of Housing, and were inherited by the present Minister. It is only right that we should express our views. Many hon. Members on this side disagree silently with what my right hon. Friend is doing in pushing the Order through. I hope that it will be the last pushed through before the Royal Commission reports.

10.54 p.m.

Mr. Graham Page: The hon. Member for Normanton (Mr. Albert Roberts) introduced some welcome liveliness into the debate, but we are, in discussing this Order, dealing with perhaps one of the most exciting areas of development in the country, if not in Europe, over the past few years.
The towns of Tees-side between the North Yorkshire moorlands and the hills of South Durham, with the level land bordering the tidal waters, have had a phenomenal growth and modernisation of industries in the past century, based on the natural resources of the area. The development of the Tees-side towns over this period undoubtedly calls for a reconstitution of local government in the area. The industrial development of coal, shipbuilding, ironstone, the constructional steel works and the great single concentration of the chemical industry at Billingham make it a unique


area for local government consideration in relation to the recommended population of about 400,000 people.
My hon. Friend the Member for Richmond, Yorks (Mr. Kitson)—whose remarks were confirmed by the hon. Member for Cleveland (Mr. Tinn)—said that this was an occasion for reform in local government but that when a Measure dealing with an area of this importance, with a population of 400,000, comes before the House, hon. Members should be told more about Government policy for local government reform and the way in which the Order fits into that policy.
The Government have stopped the work of the Local Government Commission and have appointed a Royal Commission. Yet in the past few weeks we have had Orders coming before the House creating county boroughs with populations ranging from fewer than 100 to 400,000. How many more of these piecemeal orders are we to have and what policy is emerging from them?
We are tonight considering a population of 398,000, to be formed into a county borough. The Department of Education and Science has said that the figure of population for urban areas should be about 500,000. The Ministry of Health has said that, for certain purposes, it should be less than 250,000. The Home Office has said that 250,000 would be appropriate from the point of view of the children's services, while figures of from 500,000 to 1 million have been suggested from the police point of view. Thus there is a controversy between Government Departments about the right unit of local government for the central Government services administered by local government.
In presenting the Order the Minister's statement was desperately disappointing, but of vital importance. He said that it would be a long time before any new local government structure could take effect. We had hoped, from the statements of the former Minister of Housing and Local Government—who I am pleased to see in his place, and who is now Leader of the House—that there was a dynamic policy for reforming local government. A Royal Commission was to be set up; it was to report quickly and the

new structure was to be brought into operation quickly. Do the Government consider that these piecemeal Orders represent dynamic policy? Do they think that these Measures—one or two orders a week presented to Parliament during farcical morning sittings at which hon. Gentlemen opposite do not bother to turn up to support their Ministers—represent dynamic local government policy?

Mr. Bob Brown: Does the hon. Gentleman accept that the Orders which are being presented to Parliament are being introduced as a result of many years' work by the Local Government Boundary Commission and that it would be wrong for the Government to ignore that work? Is he aware that people who advocate that because we have a Royal Commission we should do nothing, are really saying that we should stand still in local government matters, remembering that to stand still in these matters is the same as going backwards?

Mr. Page: I agree with the hon. Member. A great deal of work has been done by the Commission, and by the county reviews before that, in order to decide what form local government should take. I am surprised that those who support the Government have taken so little interest when these Orders have been brought forward. We have had them at morning sittings and at this late hour of the night. Is this the policy of the Government in having an overall review of local government structure? This policy is wholly undefined and it is time that we knew where all these Orders fitted into future policy relating to local authorities and the reform and reconstitution of the structure of local government.
We have before us tonight a very important Order. It is one which causes controversy in the county authorities and the county district authorities now to be formed into a county borough. It is proper to bring it forward and for the House to accept it. In saying that, I wish that the Minister had told the House more of the Government's policy and had stated whether this Order represents that policy and whether the other Orders which we have discussed lately, like the Torbay Order, represent that policy. We are left in complete doubt as to what is meant by this great drive by the Socialist Government to reform local government.

11.3 p.m.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl): I appreciate that the hon. Member for Crosby (Mr. Graham Page), whatever he may say about this Order, is in a rather delicate and embarrassing position. He thinks that it is a very good Order but he cannot say that too loudly without offending some of his very revered friends. I understand that, and I would not bully him about it.
I am surprised that he took this line about the Government's policy on local government reform. This is something which we have deployed fairly frequently in the course of the debates. My right hon. Friend dealt with it on the Second Reading of the Local Government (Termination of Reviews) Bill which passed through the House a few minutes ago. It was raised when we discussed the Shropshire review and it was debated on the Salop Order and the Torbay Order. On all these occasions we explained the attitude which we were adopting. We do not want to waste the work of the Local Government Commission. In any cases where the Local Government Commission has completed its job and handed its report to my right hon. Friend, the report is looked at by the Minister who makes his decision on whether it should be carried out, on the merits of the case. It is as a result of that, that we have had the Torbay Order, the Tyneside Order which has been alluded to, and this Order.
My right hon. Friend said in answer to a question that he would refer the Tyneside Order to the Royal Commission to get the Commission's views, on whether it was consistent with its ideas on local government reorganisation. He has carried out a consistent and coherent policy to get as much practical value out of the work of the Local Government Commission as he could. The point of doing that, and not merely scrapping the work while we wait for the Royal Commission, has been shown in this debate. Practically nobody has been able to make out an argument against the proposals.
In a desperate attempt to find some ground of opposition, my hon. Friend the Member for Normanton (Mr. Albert Roberts) expressed surprise that nobody south of the Tees had supported the

Order. However, in all fairness, the hon. Member for Richmond, Yorks (Mr. Kitson) explained the reason. My right hon. Friend the Member for Middlesbrough, East (Mr. Bottomley) was here fervently desiring the Order to go through, but was muzzled. So brilliant is the renaissance of Tees-side, of which this Order is an expression, that practically all the hon. Members from the area are members of the Government and in very high office. My hon. Friend the Member for Cleveland (Mr. Tinn), whose constituency is south of the Tees—I have checked with the map to make sure—has only a short pause until he joins the rest Tees-side ranks second only to Lancashire as a centre of political power.
The most valuable thing about the Order is that it is an early experiment in regarding a river not as a frontier, but as a source of common interest, and this is true of Tyneside and Merseyside. The hon. Member for Crosby and I have similar interests on Merseyside in that sense. It is of value to the work of the Royal Commission and not a handicap to it that this experiment should begin of seeing how, building on an area of substantial agreement, this can be made to work. As my hon. Friend the Member of Cleveland fairly said, in getting to this agreement on the Order there has been a democratic resolution of a great conflict of opinions and loyalties, and there is now a determination to get on with it.
The only substantial objection to the Order is that it is made at the cost of the North Riding to which it will be a severe blow financially. It will not severely cripple Durham which, in the league table of counties, will remain substantially above the middle, worse off, but not absolutely crippled. I am certain that we can be confident that it will continue to do a useful job.
I remind the House that Article 64 of the Order provides for transitional assistance from Tees-side if the increase in the rate burden on the North Riding gets beyond a 6d. rate. I do not say that that provision was welcomed by Tees-side with an outburst of filial loyalty to the North Riding, but it has been accepted as a responsibility which Teesside will shoulder.
For those reasons, the fact that the Order has had general approval, that it


is consistent with the new approaches to local government and that it will not cause substantial harm to the counties from which the area is taken, I ask the House to accept the Order.

Question put and agreed to.

Resolved,
That the Teesside Order, 1967, dated 18th January, 1967, a copy of which was laid before this House on 25th January, be approved.

EXPORT GUARANTEES BILL

Considered in Committee [Progress 13th February].

[Mr. SYDNEY IRVING in the Chair]

Clause 1.—(RAISING OF LIMITS ON GUARANTEES, ETC.)

Question proposed, That the Clause stand part of the Bill.

11.10 p.m.

Mr. Terence L. Higgins: There are some serious points on this Clause, the major Clause of the Bill, on which we must ask the Minister of State for clarification. The Bill raises the limits within which the Export Credits Guarantee Department is enabled to operate, and we on this side have already made clear that we support the action which the Government propose. When I spoke on Second Reading I said that the Department was doing a very good job in promoting the nation's exports, and I stressed the importance which this had for the working of the whole economy. But one has heard some criticisms of the way the Department works, and I think it right to say what these are alleged to be and to ask for explanations.
The questions of particular importance arise in connection with shipbuilding credit. The rôle which the Department plays in shipbuilding is vital because there is no market in which competition on credit terms is more severe than this. The shipbuilding market has been distorted in the post-war period by the development of flags of convenience, the advent of flag discrimination, the question of shipbuilding subsidies and changes in the whole basis on which shipbuilding is financed.
Before the war, shipbuilding was financed largely on the basis of knowledge of the expertise of the ship-owner concerned. In the post-war period, it has been based largely on the fact that the person building the ship has been able to obtain a long-term charter from a certain company, frequently an oil company, and raise credit on that basis. This has led to a general intensification in the competitive credit terms offered by various countries in order to stimulate the activities of their shipbuilding industries.
The Committee will agree that the terms now offered by the Export Credits Guarantee Department are very good. Eighty per cent. of the total cost spread over ten years is offered at 5½ per cent. interest, and this is available to foreign ship-owners buying from British yards. But these loans are subject to the Department's cover, and, as one sees from the admirable E.C.G.D. booklet explaining the work of the Department, this can take two alternative forms. It can either come under a special shipbuilding policy or it can come under a financial guarantee. On this basis, the Department will ask the person who requests the guarantee to provide a certain collateral, and this can take the form, in the case of an owner of considerable standing in the international market, of a purely personal guarantee, or, if his standing is, perhaps, not sufficient on a personal basis, it can take the form of a mortgage on other ships in his fleet. Alternatively, a long-term time charter of the kind I mentioned just now can be taken into account.
As I understand it, the Export Credits Guarantee Department does not have a standard basis for deciding how the collateral offered by the ship-owner shall be calculated, and one hears complaints—perhaps valid, perhaps not—that other countries which are notable for their shipbuilding activities make clear to those who wish to raise credit to purchase ships the basis which they will use when evaluating the first mortgage on the ship itself. This means that the person concerned can form a very clear idea of how much additional collateral he has to raise. It is very similar to someone undertaking a house purchase, where it is a question of how much a building society will advance on the basis of the house itself, and then how much additional collateral the building society will ask the owner-occupier to provide.
11.15 p.m.
Clearly, as with a house so in the case of a shipbuilder it is a great advantage to know how much the person offering the mortgage is prepared to advance on the value. A number of other countries, anxious to promote their shipbuilding, have made it clear to international purchasers that they will regard a certain percentage of the value of the ship as collateral.
If the ship is valued at £1 million, they might say, "We will take 40 per cent. of the value of the ship as collateral," or alternatively it might be 60 per cent., "and this will go towards the percentage on which we are prepared to give you a loan". I presume that over and above that amount, the purchaser has to find the whole amount out of his own resources.
The point which troubles us on this side of the Committee is that we feel that unless the Export Credits Guarantee Department is prepared to make a similarly clear statement of the amount of the value of the ship which it is prepared to take as collateral it might be that although the terms are extremely good and competitive compared with those of other countries, none the less the order goes to a Japanese or Scandinavian shipbuilding yard rather than to this country. This is something which I think the whole Committee will agree we need to avoid if it can be done by a fairly simple administrative change.
Clearly, there would have to be exceptions. One would not expect the E.C.G.D. to take as collateral the same percentage of the value of a ship, let us say, of the heavy-lift sort, a special vessel the market for which may be uncertain. But so far as the general run of tramp or line shipping is concerned, one would have thought that a clear statement of this kind would do a great deal to make it easier for those who wish to sell British ships from British yards to become competitive in offering standard terms.
The second point which I think needs to be made is concerned with the way in which the application is treated. It is sometimes said that the E.C.G.D. is not as rapid as similar organisations, or organisations for fulfilling the same purpose in other countries, in carrying through the negotiations, which involve considerable sums, of the order of £1 million, more or less.
If it were possible for the E.C.G.D. to provide a standard form—clearly with some sections which would allow for exceptions for a particular vessel—this would provide something which a British yard could show to a prospective purchaser. It could then say, "This is the


type of form we normally need completed", and could indicate which pages needed to be filled up automatically and which might need to be discussed. If a standard form could be provided, it might help to speed up the process, and in this kind of market speed may well be the deciding factor whether an order comes to this country or not.
Thirdly, there is a case for standardising the terms on which the E.C.G.D. itself offers to finance the purchase of a ship. I understand that it has been the practice of the E.C.G.D. in recent times to impose certain conditions. I understand, for example, that it is required that the vessel concerned shall be insured directly at Lloyds. Is this the normal practice of the E.C.G.D.? If so, is it done off its own bat or at the request of Lloyds? Who is responsible for adopting this policy?
Whether the insurance is placed at Lloyds or elsewhere it is statistically likely to come back to Lloyds through the reinsurance market. The danger is that if restrictive terms of that sort are imposed by the E.C.G.D. foreign owners may well feel that because they are forced to insure the ship concerned directly at Lloyds the insurance they already have directly with Lloyds should be withdrawn. When our position in insurance is so pre-eminent, and the conditions we offer so good, there may be a case for eliminating that kind of term. I should be glad if the Minister could confirm whether restrictions of that kind are imposed, and whether there are good reasons for their imposition.
I studied with considerable interest the booklet on the E.C.G.D., particularly as it concerned shipbuilding, and a question arises on the rate of interest discussed on page 46 under the heading, "Financing a major project"—of which shipbuilding is regarded as one—"Financial Guarantees". The normal advance is 80 per cent. over 10 years, at a rate of interest of 5½ per cent. The paragraph concerned says that
… the banks have agreed to provide such finance at a fixed rate of interest of 5½ per cent.
When I discussed interest rates on Second Reading I said that I thought that in

general terms there was a case for this country adopting the same rate of interest as other countries, and for there not being a kind of Dutch auction on interest rates.
That competitive rate of interest is granted for shipbuilding by the banks themselves, apparently. It is significantly below the present Bank Rate, and has been so for a number of years. Can the Minister tell us whether the banks grant it entirely on their own initiative or whether it is something with which the Government help them in some way?
The Committee will appreciate that my points on the Question, That the Clause stand part, are designed, as our probing Amendments throughout have been, to ensure that the exports of this country are given every facility in a very competitive market to enable them to earn the foreign exchange on which we inevitably depend. It was for that reason that it seemed to me to be worth while to put forward those points which arise on the raising of the limits. As I pointed out on Second Reading, we get an opportunity to discuss this whole matter only every three, four or five years. If anything can be done that will improve the position of our exporters by raising those points in Committee I think that the Opposition are right to raise them.

Mr. R. Gresham Cooke: The Export Credits Guarantee Department is doing a splendid job. It is helping our exports every year, probably by a larger and larger amount, but two complaints were made to me recently when I was talking to a ship-owning friend. He said that by the Department's operation foreign ship-owners were getting a more favourable rate on borrowing money to buy British ships flan was the home ship-owner. If that is the result of this legislation and the policies of the Department, this should be seriously looked into. Obviously, we want to increase exports but we do not want to penalise the home ship-owner.
The other point which has been made to me from time to time is that, whereas the big companies are pretty well satisfied with the work of the Department, the small man always seems to have a little more difficulty. He has to pay a higher rate than the big man when he goes for the small parcels of insurance. Perhaps


he does not know his way round the Department and does not quite find the information that is so easily found by the big company. By and large, the small man is not so satisfied as the big man with the work of the Department. These two points have been made to me over the last few months about the work of the Department, which generally is excellent.

Mr. John Wells: I want to address my remarks mainly to something said on Second Reading by my hon. Friend the Member for Worthing (Mr. Higgins) and about which the Minister of State very kindly wrote to him. My hon. Friend mentioned specifically the problems of the horticulturist. As he has just said, we get the opportunity to discuss this matter only every four or five years and I urge upon the Minister of State the problems that are likely to lie ahead of British horticulturists during that period.
We are passing a Measure to provide a sizeable sum of money which is quite essential to the work of the Department, and I am wholly behind it. But the British horticulturist has a curious problem. He has to get over the hurdles of plant health restrictions in other countries after getting a certificate from a Ministry of Agriculture inspector in this country.
I would like the Department, within the framework of the cash we are giving it, to be able to guarantee a small exporter who has a certificate from the Ministry of Agriculture that his produce complies with the regulations of the other country concerned. He would be able to go to the Department and insure the certificate, given in good faith and expected in good faith to be accepted in the country of delivery.
The right hon. Gentleman wrote to my hon. Friend after the Second Reading debate because there was not time to answer the point and I thank him for his courteous letter. Where the small horticultural exporter is not flouting the laws of the other country—I realise that he could not be guaranteed against that—but where an inspector in that country is, to put it bluntly, bloody-minded in face of a reasonable certificate given here by the Ministry of Agriculture, and declares the product unacceptable for

health reasons, with the result that it is destroyed, there is no further evidence and no come-back for the poor chap here, who has to meet the loss involved.
The right hon. Gentleman made the valid point in the letter that there is no limit to the amount of guarantee but that the small exporter has to pay a slightly higher premium because he is able to shop around for all the cover he needs, but as we are unlikely to have another opportunity to raise this matter again for some four or five years it is essential, even if such a provision cannot be incorporated in the Bill at this late stage, that the Department should seek to give this special umbrella to the horticultural exporter.
11.30 p.m.
I say this because at this juncture we are getting closer to the Common Market, and the British nurseryman is the one section of the horticultural industry who is likely to do well in the export sphere. As the Minister of State is well aware, some of our leading chrysanthemum houses have an extremely good record in exporting cutting materials and rooted cuttings. The great tradition of the British gardening and the nursery trade, as opposed to the trade in foodstuffs, is likely to have great export potential. It is here that the Health Regulations, and the relations of the Ministry of Agriculture inspectorate between one country and another, come into the picture.
The Minister is aware of the constituency case which I raised with him, and I am most grateful to him for his help although it was negative. I appreciate the interest that he has taken. I am not addressing my remarks to any single constituency matter but to British agriculture as a whole, in view of the problems which will lie ahead in the next four or five years.
There is one final point, arising out of what was said by my hon. Friend the Member for Twickenham (Mr. Gresham Cooke). This dealt with overseas ship-owners being in a more favourable position. I remind the Minister of State of another matter to do with shipping, which I have raised with him by correspondence and which was raised by my noble Friend, Lord Drumalbyn, on the Report stage of the Companies Bill in


another place. As I understand it, the matter was also raised by my hon. Friend the Member for Harrow, Central (Mr. Grant) earlier this afternoon, on the Companies Bill. I hope that the Minister will bear in mind the point about marine mortgages, and tie it in with the thoughts that must arise out of the principal monetary Clause of this most important Bill.

The Minister of State, Board of Trade (Mr. George Darling): I am glad co say that the hon. Member for Maidstone (Mr. John Wells) is under a misapprehension about the raising of matters from time to time. He does not need to wait for the next Export Credits Guarantee Amendment Bill. I invite him, because the points that he has raised by correspondence and in conversation are germane to the export trades of this country, to raise matters at any time that he likes. The hon. Member for St. Ives (Mr. Nott) pointed out in the House on Monday morning, in a truncated debate, during some actions that I cannot, in language unguarded, describe, that as a merchant banker he could go to the Export Credits Guarantee Department and raise questions, but when he wanted to raise matters with the Department as a Member of Parliament he had, for obvious reasons to act through me.
I hope that the hon. Gentleman will bring his questions to me, and I will endeavour to deal with them as quickly as possible. The point about the horticultural trade, is being looked at again and I can assure the hon. Member that the Export Credits Guarantee Department has a sympathetic approach to the problem. It does arise in other instances——

Mr. John Wells: It does not occur in any other instance so finally, because once stocks have been destroyed by what I call a bloody-minded inspector, they have gone for all time.

Mr. Darling: It is not so clear-cut. I was going on to say that it arises where, because of unexpected rules and regulations in the importing country, the export order disappears and the poor exporter is left with the whole cost of the operation, receiving nothing in return. This occurs in other cases. It is a problem that we have to deal with. As I say, we shall look at the horticultural

question again and try to deal with it sympathetically.
The question of marine mortgages is a little more difficult. I think we can discuss it on another occasion. As I have said, the future occasions are not limited in any way.
The hon. Member for Worthing (Mr. Higgins) raised two very important issues on shipbuilding. We understand and appreciate their importance. However, I think that I can answer him fairly briefly.
First, there is the question of a formula for evaluating mortgages. As we understand it, the overseas shipbuilding country to which he has referred uses a formula whereby the mortgage is normally taken as 55 per cent. of the total cost of the ship. That is where it begins. But there are exceptions, we understand. We have friendly relations with the country concerned and are having discussions about just what the exceptions are.
The approach of the E.C.G.D. has been somewhat different. This is the way in which the Department has worked in the past. Rather than have a standard formula, the Department has been far more flexible in its general approach to securities, whether they are mortgages or otherwise. I understand that, generally speaking, this has been favourable to British shipbuilders seeking to sell their ships abroad.
It must also be remembered in this regard that the credit period available through the Department is often longer than that given by the country to which the hon. Member referred, but because it has been the policy of the Department to put British exporters at least on level terms with their competitors, we are looking at the whole matter again. We are taking account of the recent representations made to us by British shipbuilders, and we are looking urgently into whether it would be desirable to offer similar arrangements for mortgage evaluation to those provided in other countries. So again we stick to the claim that we make, that we will match the best credits that are being offered by other countries.
I think we had better leave it at that point. The operative word that I have used is "urgently". We are looking into the matter urgently. The representations that we have received make it


quite clear that this is an urgent problem and that we must get it right.
The hon. Member's second point was about what I would call standard documentation. Most shipping credits at the moment take the form of loans from a British bank to the buyer, guaranteed by the Department, which enables the buyer, in effect, to pay cash for the sale contract. Standard application forms for this type of cover are already available from the Department. The Department's view is that it is not possible to produce a completely standard form of loan agreement because the circumstances, needs, trades, markets, borrowers, lenders and so on vary so widely, but we agree that it would be useful to have a standard specimen form of agreement that could be shown to buyers and used as a basis for drafting the final contract in a great number of cases. The Department has already got this form in preparation, and it will be available very soon.
I think that the criticism that has been made by the hon. Member has been anticipated, but, of course, he is not the first person to make the criticism. I have asked the Department to look at the question of Lloyd's reinsurance and the possibility that this may go round in a circle. I am not sure of the answer, but I will get in touch with the hon. Member and we can discuss it again.
As to Bank Rate, I understand that since 1962 the banks have been making available medium-term finance at the fixed rate of interest mentioned by the hon. Member of 5½ per cent. for export transactions which are covered by the specific bank guarantees. These arrangements were later extended to include longer-term finance provided against the Department's financial guarantees. For business on short-term credit of less than two years, arrangements were introduced early this year whereby the banks agreed to make finance available at Bank Rate for business covered by the comprehensive bank guarantee. At present, I understand that this applies only to bill business, but the Department is discussing with the banks the possibility of widening the scheme to embrace open account business as well.
The 5½ per cent. arrangements were originally for five years from January, 1962. The arrangements are continuing

unchanged, but the Department and the Board of Trade will be reviewing all the circumstances relating to these bank guarantees and the rate of interest in a year's time. I do not know whether the hon. Member can wait so long, but we will certainly have opportunities for discussing these matters before then. I will keep the hon. Member informed of the progress that we make in the discussions.
I am sorry that the hon. Member for Twickenham (Mr. Gresham Cooke) has not caught up with the proceedings under the Bill. His question concerning British buyers of British ships getting credit terms less favourable than for foreign buyers of ships built in the United Kingdom does not arise on the Bill.
When the question was raised on Second Reading, I made it clear that we were considering a Bill dealing with export credits and that, therefore, the question of credit terms for British buyers of British ships did not come within the scope of the Bill. As I explained on that occasion, however, my right hon. Friend the Minister of Technology, who includes shipbuilding under his umbrella of responsibilities, had made an announcement in the House. My right hon. Friend said in answer to a Question on 17th January:
I am now considering representations made to me by shipbuilders about credit facilities in the light of the overriding need for reorganisation of the industry."—[OFFICIAL REPORT, 17th January, 1967; Vol. 739, c. 21.]
The question raised by the hon. Member for Twickenham is, therefore, being considered fairly urgently by my right hon. Friend the Minister of Technology, whose responsibility it is. This Bill is an exporting Bill and not a Bill to provide credit terms for British buyers of British ships.

Mr. Gresham Cooke: Is it true, however, that by the operation of the Bill the foreign shipowner gets more favourable terms than a British shipowner?

Mr. Darling: Yes—at least, that is the allegation which is made. As I have said, the position is being looked into. If the hon. Member refers to the Second Reading debate, he will find that it was dealt with then.

Mr. Higgins: I should like to take up the point made by the Minister of State, who will, I am sure, agree that the


foreign purchaser aspect of the shipbuilding side is important.
11.45 p.m.
I welcome the statement that the right hon. Gentleman has made on standard documentation, as I am sure will British shipbuilders and foreign purchasers.
On the extent of collateral, I am sure that he is right in saying that a certain other country appears to be much more specific than we are. On initial inquiry, they may say that the value of a ship will be taken as 55 per cent. of the total cost, so that on an 80 per cent. mortgage, the owner is expected to find some 25 per cent. of the cost as collateral security.
While I accept that there must be some exceptions, I hope that in the urgent consideration which the right hon. Gentleman has promised to give to this matter he will consider whether some specific statement cannot be made, both in the case of dry cargo ships between certain specified tonnages and equally in the case of oil tankers presumably between somewhat larger tonnages. If these minimum figures can be set down, it will enable the ordinary purchaser of a standard dry cargo vessel or oil tanker to be in a better position to assess the credit position. It is much the same as the distinction between houses and purchase-built flats in the housing market. If that can be done, it will be a great help.
Another point which has been worrying me is that the E.C.G.D.—the bank between them—is asking for a lot of collateral guarantees, a down-payment, and so on, yet there is still an E.C.G.D. guarantee. What is it that the Department is guaranteeing, when it is already covered by collateral where the value of a ship, which is presumably worth 100 per cent. of its cost, is only valued at 55 per cent., and on top of that there has to be a personal guarantee, and on top of that there has to be a long-term charter? I faced much the same situation when I came to buy a house, but in that case a guarantee was not required in advance.
I am sorry to spring this on the Minister of State, but it has been worrying me. What is being guaranteed in this context? I appreciate that the right hon.

Gentleman will not be in a position to answer at this moment, but perhaps he will be good enough to let me know in due course.

Mr. Darling: I will write to the hon. Gentleman about that.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Bill reported, without Amendment.

11.48 p.m.

Mr. Darling: I beg to move, That the Bill be now read the Third time.
In spite of some unfortunate episodes on Monday morning, the hon. Member for Worthing (Mr. Higgins) and the House generally have dealt with the Bill sympathetically. It has received the full support of the House both on Second Reading and in the subsequent proceedings during which we have discussed its terms. If there are any more issues which hon. Gentlemen care to raise, they can do so now or by correspondence, and I shall do my best to answer their queries.

11.49 p.m.

Mr. Higgins: I cannot accept the right hon. Gentleman's view that the events of yesterday were necessarily unfortunate. What was unfortunate was that two quite separate issues became confused. On the one hand, there was a debate on various Amendments which we were considering. On the other hand, there were some very important procedural innovations whereby an important matter was dealt with without there being any quorum rule at all. I think that my hon. Friends were justifiably incensed about these innovations, but I agree with the Minister that it was unfortunate that these became entangled with the discussion on the specific points which were raised in Committe.
I want to make one or two points in response to the Minister's invitation. In particular, I want to thank the right hon. Gentleman for the very full way in which he has replied to a number of points which my hon. Friends and I raised during the Second Reading debate by writing to them. We are grateful to him for the manner in which he has answered


the various matters which were raised, in particular the matter which was raised by my hon. Friend the Member for Maidstone (Mr. John Wells).
There are one or two points which the right hon. Gentleman made in a letter which he was kind enough to write to me which I think deserve to be mentioned, and also one or two which have arisen spontaneously as we have considered the various aspects of the Bill.
One of these was prompted by the excellent document which has now appeared in the Library, I imagine at the instigation of the Board of Trade, a survey by the Port of London Authority concerning Britain's foreign trade which is very relevant to the matter we are considering, and which gives figures and regional destinations of imports and exports which have hitherto not to my knowledge been available. On a previous occasion I had reason to need figures of this kind, but they were not in existence.
With regard to the proposals for container traffic, does the Bill cover export credit guarantees on containers? This is undoubtedly a growth sector of the economy and something about which I am sure the Board of Trade is concerned.
I turn now to the specific points which come up in the Minister's letter. In cooperation with one of his right hon. Friends the Minister wrote to me about the change which has been introduced with regard to aid. The Minister said that although aid would now be considered by the Ministry of Overseas Development and that the policy of the Government was being centralised, none the less Section 3 of the parent Act—and this Bill increases the limits—would remain in existence. During the Second Reading debate we suggested that there was a case for transferring the whole matter to the Ministry of Overseas Development.
The Minister said in his letter:
We do not think there would be any virtue in transferring credits already given under section 3 to the Ministry of Overseas Development; this would be a complex operation from the legal and accounting point of view and would not serve a useful purpose. The present position is straightforward and should not give rise to any difficulty: outstanding Section 3 credits, which figure as liabilities in the E.C.G.D.'s books (but separately from, not in the accounts relating to credit insurance opera-

tions), will be gradually reduced and finally eliminated as repayments are received.
The right hon. Gentleman went on to explain the loans which had been given to overseas countries under this procedure.

Mr. Darling: With due respect to the hon. Gentleman, I do not want to stop him discussing Section 3 of the main Act, but there is nothing in this Bill about Section 3 of the Act and I understood that on Third Reading we could discuss only the things in the Bill.

Mr. Higgins: I accept that. The point which I want to make is that the Bill increases the limits and there has been a change so far as the Government are concerned which alters the position with regard to Section 3.
Why are the Government certain that we should extend the financial limits to cover Sections 1, 2 and 3 of the parent Act? Would it not have been much more convenient to transfer responsibility for section 3 covering aid to the Ministry of Overseas Development? As I understand it, the repayments which now come in and which are affected by limits imposed by the Bill will go back to the Export Credits Guarantee Department, and will then be refunded to the Treasury. Would it not be better for the Ministry of Overseas Development to take over the whole operation, when the funds would presumably go back to that Ministry and be reallocated in the aid programme?
I am not clear why the Minister does not feel that this would be a more convenient arrangement than that which he is proposing. My hon. Friend the Member for Dorking (Sir G. Sinclair) and I feel that it could be a much better arrangement to centralise this in accordance with the Government's own policy.

11.56 p.m.

Mr. John H. Osborn: To intervene in a Third Reading debate just before midnight is always a dangerous thing to do, but I hope the Minister will bear with me. This morning I read that an interesting debate took place between 11 a.m. and 11.30 a.m. yesterday morning and that there were particularly interesting contributions by my hon. Friend the Member for St. Ives (Mr. Nott) and my hon. Friend the Member for Oswestry (Mr. Biffen).


During that time there was a reference to the American A.I.D. Department and the sort of assistance given by the equivalent Department to the Export Credits Guarantee Department in the United States. We now have an opportunity of debating that issue.

Mr. Deputy Speaker (Mr. Sydney Irving): Order. That is outside the scope of the Third Reading debate.

Mr. Osborn: I have to be guided by you entirely, Mr. Deputy Speaker, but surely something which was discussed on a Clause in Committee is relevant to our discussion now.

Mr. Darling: On a point of order. Mr. Deputy Speaker, the Amendment that gave rise to that discussion was withdrawn. It is not in the Bill, and in view of that fact I feel that it would be an imposition on the House at this time of night to debate an issue which I think—I do not know whether I am right—is completely out of order.

Mr. Osborn: The Minister of State is saying, with a certain amount of arrogance——

Mr. Deputy Speaker: Order. Whatever the language of the Minister, he was confirming the Ruling that I have given that the hon. Member's remarks were outside the scope of the Third Reading debate.

Mr. Osborn: I have to be guided by you, Mr. Deputy Speaker, and I want some guidance how this Bill operates in extending the powers under Clauses 1 and 2, referring to commercial transactions and transactions in the national interest, respectively. The publication that I have deals with medium and long-term matters—heavy engineering loans and so on, and I was seeking clarification how these provisions would be used. If my remarks are not relevant to this debate, perhaps they could be raised in an Adjournment debate at another time.

Mr. Darling: During the discussions on this Bill I made it quite clear, time and time again, that when any Government have been asked for an increase in the insurance cover an opportunity has been given to discuss the general principles and, if there is time, some of the details. I have always said that if

hon. Members have any issues of interest to raise, if they write to me I will see that they get the fullest possible information, of which they may make the fullest public use.
I suggest that it is an imposition, at the end of all these discussions, to raise issues like this at this time of night. I would also point out that, because of the way in which these matters were raised, I had to have representatives of the E.C.G.D. at my house yesterday morning to get ready for the debate. There is a limit to what I am going to take.

Mr. Osborn: I try to treat the House with the greatest courtesy, and I would not wish to be discourteous to the Minister of State, but there were lengthy debates yesterday on this——

Mr. Darling: Yes: the hon. Member should have been here.

Mr. Osborn: There have been lengthy debates on this and it is only by reading the issues raised in Committee that undoubtedly matters of great interest on policy and other issues have to be considered by the House now. I have taken part in other Third Readings and consider that it is right for matters like this to be discussed. If we cannot do this, it means that we will be gagged. The gagging of back-benchers is a new aspect of Parliament. It is something which I would accept——

Mr. Deputy Speaker: Could I help the hon. Member? The only concern of the Chair is to ensure that the rules are carried out. On Third Reading, only things actually in the Bill may be discussed.

Mr. Osborn: I do not wish to argue with the Chair, but it is obviously impossible to deploy relevant arguments if the Minister of State walks out of his seat and the Chair questions points which I am trying to raise——

Mr. Deputy Speaker: Order. The Chair is only enforcing the rules which the House itself has laid down.

Mr. Osborn: Obviously, this raises major points of principle. I have taken part in very important debates recently, particularly on the Iron and Steel Bill, and I understood that, contributions by a back-bencher who was unable to speak


in the Committee were welcomed on the last stage. If not, I will withdraw the point which I wished to raise about the attitude of E.C.G.D. in supporting the export of capital goods from this country.

Mr. Darling: On a point of order. This, too, was raised on the early proceedings. This Bill has nothing to do with the insurance cover of overseas investments.

Mr. Osborn: It is the insurance cover of the capital which goes out from this country——

Mr. Darling: No.

Mr. Osborn: Capital goods, which are all part of it.
I have been arguing for longer than I intended. It is a new slant on the conduct of Parliament. There are plenty of other opportunities to raise these issues, but it seems that Parliament is no longer the forum to raise——

Mr. Darling: The hon. Member should have been here yesterday.

Mr. Deputy Speaker: Order. The Minister of State does not apply the

rules of order; the Chair does. The Chair has said that the hon. Gentleman is entitled to raise on Third Reading only matters which are in the Bill. He sought to go outside the provisions of the Bill. That is the only bar which has been put on the hon. Gentleman.

Mr. Osborn: I had intended to deploy a constructive speech and I have already taken five minutes longer than I had anticipated it would take me to ask a few questions. There seems to be a general reluctance on the part of the Minister to deal with this issue and it is with a certain amount of regret that I am obliged to leave this matter until another occasion.

Question put and agreed to.

Bill accordingly read the Third time and passed.

ADJOURNMENT

Resolved, That this House do now adjourn.—[Mr. McBride.]

Adjourned accordingly at six minutes past Twelve o'clock.